Something to Teach, Something to Learn by Mark Britnell

Something to teach, Something to learn

Global perspectives on healthcare kpmg.com/healthcare

KPMG international b Something to teach, Something to learn

Marc Berg, KPMG in the Netherlands

© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved. c

A truly global outlook This report aims to provide a snapshot of the thinking and learning that emerged from KPMG’s Global Healthcare summit held in Rome in October 2012. It also looks at some of the main implications of that learning for those who pay for healthcare, those who provide it and those who consume it. On the following pages we explore: • The emergence of the ‘activist payer’ – the role of this new breed of healthcare commissioner in shaping system change, driving payment reform and influencing behavior. • The dilemmas facing providers in a changing environment – to transact or transform, to grow or to evolve, hospital or health system, passive partner or active change-agent. • Patients as partners – changing expectations, shared decision-making, health literacy, looking beyond the rhetoric to make patient power a reality. The report concludes with a number of key recommendations for action and sets out some important next steps that we believe global healthcare systems need to be thinking about in the coming months and years.

Wai Chiong Loke, KPMG in Singapore Dr. Kevin Smith, St. Joseph’s Health System, Canada; Prof. Benjamin Ong, National University Health System, Singapore; Dr. Arthur Southam, Kaiser Permanente, US

Introduction 1

The emergence of the ‘activist payer’ 4

Higher value can only be realized by moving care upstream 4 Payment reform is key 6 From passive payers to activist change-agents 7

Providers: transact or transform? 18

Developing new strategies 19 Putting the strategies together 28

Patients as partners 32

The case for change 32 Embracing the change 34

Conclusion 38

Systemic change – making it happen 38

Introduction

We all have something to teach and something to learn. Today, traditional healthcare doctrines, they are innovating fast. healthcare systems around the world are experiencing an era It is a global phenomenon offering extensive learning, of rapid and dramatic change as they struggle to cope with and opportunities for all. aging populations, technological advances, rising expectations • Sustainable change and better value are increasingly being and spiralling costs. seen as a direct result of new approaches to integration. A Practical answers to difficult questions are needed. With this survey of our delegates revealed that 90 percent of payers, in mind, KPMG’s Global Healthcare practice brought 40 senior providers and professionals believed integration would executives and clinicians, representing some of the world’s produce better patient outcomes, while three-quarters largest healthcare organizations from 22 countries, together were confident that it would cut costs. for a conference in October 2012 to share their insights, ideas Our payer and provider participants (listed at the end of and outlooks. this publication) shared some anxieties over the long-term Despite the differences between their national systems, the sustainability of their respective health systems and existing delegates found striking similarities in the way that payers care and business models, but remained confident that these and providers are rethinking their strategies and developing challenges could be met. new approaches. Overwhelmingly, participants agreed that individuals, organizations, systems and nations alike all have A central paradox something to teach and something to learn. The report looks at the major problems facing many health In particular, delegates identified five major trends reshaping systems, as well as the scope for agile organizations to healthcare today: exploit new models and opportunities. • Payers – whether governments, public sector bodies or It also highlights, however, a central paradox. insurers – are becoming ‘activist payers’ by focusing on value, While nearly all of the delegates expected ‘moderate or contracting more selectively, reshaping patient behavior and major business model change’ within the next five years, moving care upstream to focus more on prevention. there was a consensus that too many systems are still • Providers need to rethink their approach as it is becoming behaving as though these changes only affect other people. clear that major transformational change can no longer be They are focusing on minor transactional change rather than delayed. Some hospitals have the opportunity to transform the major transformational reform required to address future themselves into ‘health systems’, providing new forms of challenges. much more extensive and integrated care and taking more Making the first step along a different path requires an act of risk and accountability for outcomes from payers. Others courage, and committed leadership. This report is a call for need equally radical approaches to reshape their operating such a journey of leadership. models. Ultimately, leaders and their organizations must learn to focus • There is an imperative to engage patients in new ways so on patient value and outcomes. that they become active partners in their care, rather than passive recipients. This requires new systems and ways of In the past, many healthcare systems have been fueled and working – as one physician put it, clinicians need to change driven by supply-induced demand rather than concentrating their role from ‘God to guide’. on outcomes – what patients really need and want. Such perverse incentives cannot provoke cultural change or the • The rise of the ‘high-growth health systems’, from implementation of best practices. rapidly developing countries in Asia, Africa and South America, is changing global outlooks. Unencumbered by

Anne McElvoy, The Economist; Mark Rochon, KPMG in Canada; Prof. Bastiaan Bloem, Radboud University Nijmegen Medical Centre, the Netherlands

Shifting the balance from volume to value will not be easy. We hope you find this publication stimulating and look Change is hard, risky and painful. Providers will need forward to continuing this global debate. Do join us. support as they bear the brunt of systems’ streamlining and integration. Strong leadership will also be required to shift the focus from short-term goals to long-term ambitions. The best leaders, while not shying away from the biggest challenges, will reduce complexity. They will look beyond process targets and they will allow space for their organizations and staff to innovate and experiment on the way to creating new models of care. Dr. Mark Britnell Nigel Edwards We would like to thank our member firm clients, partners Chairman and Partner Director of Global and practitioners who have contributed their time and shared Global Health Practice Health Systems their learning so generously. KPMG in the UK KPMG in the UK

The emergence of the Activist Payer

There should be little doubt that the world payers will need to use their leverage to is changing rapidly for healthcare payers, help redesign care delivery systems that whether these are private insurers, have existed in the same form for more sickness funds or, as is the case in many than a hundred years. This will require parts of the world, governments. Whether payers to experiment with innovative they are dealing with subscribers, payment models to move incentives employers, taxpayers or ministries of towards outcomes rather than inputs, finance the requirement is the same – build new alliances with consumers and higher quality and lower cost – even in policy makers to help providers reinvent countries such as India and China that are themselves and focus much more on committed to increasing their spending. In prevention. For government, this means countries where people are largely paying using the full range of policy levers to out of pocket, policy makers will need to improve health, change behavior and create mechanisms to ensure that the incorporate health into all policies; health sector is efficiently producing good for example in the creation of healthy quality. Without this there are serious risks cities, dementia-friendly places, and the to the ability of many systems to continue use of taxation to create incentives for to provide the current level of coverage. behavior change. In the past, public payers played a largely Higher value can only be administrative role, while private payers focused mainly on reducing provider realized by moving care prices and managing risk. However, upstream today we see both groups are beginning While it may now seem like a given, it to recognize that the surest way towards has only been in the last decade that long-term viability lies in improving health organizations have recognized the value of the care produced, rather better care – more effective, safer, Today we than the costs. As such, population more patient-centered – is usually less health management and value-based expensive care.1 Indeed, by preventing see both groups purchasing are increasingly becoming disease and the complications that are beginning to a priority for public and private payers, often accompany chronic illness or while a focus on value means that unnecessary or avoidable care, we can recognize that private payers are starting to realign improve the quality of life for patients their business models with the goals and reduce the cost for payers. the surest way articulated in public policy. Put simply, care must be moved towards long- Essentially, payers are starting to upstream, shifting the model from one term viability lies recognize that providing better value where health systems prefer to wait often means ensuring that care is for conditions to become acute (and in improving the consistently high in quality, lower in then take care of patients in high-cost cost, appropriate and timely. This will medical centers) to one where the focus value of the care require both public and private payers is on preventing these conditions from produced, rather to develop a very different approach becoming acute in the first place.T his to their operations. They will have to includes treating patients proactively in than the costs. become, in the words of one private their own environment. One aim of the insurer, truly activist. In other words,

1 Dr John Øvretveit: Does improving quality save money? The Health Foundation, 2009.

Frances Diver, Victorian Department of Health, Australia and Chris Rex, Ramsay Health Care, Australia health system should be to mobilize, value seems practically impossible, Achieving this level of integration will activate and support a patient’s self- leading payers and providers to come require wholesale change that moves management in his or her own home to the conclusion that care must be systems from a provider-led organization so that he or she does not have to be delivered in a much more integrated and of care towards a patient-led system of admitted to an acute hospital center or coordinated way. care. This, in turn, implies that the efforts nursing home, which, more often than of primary care professionals (GPs, “We need to move towards population- not, triggers further deterioration of the home care, community nurses, and based care, following the patient. The patient’s condition. physiotherapists) should be coordinated hospital is just a very small part of the with those of the medical specialists Delivery must be integrated and continuum of care most patients need. so that they work not just together, but coordinated Organizing our care around the hospital also with the patient, as a single team When viewed within the context of turns the whole focus upside down,” focused on a common goal. many of our current, highly fragmented said Sir Ian Carruthers, Chief Executive, care ecologies, the transition towards National Health Service, South of England.

Case Study

Chris Rex, CEO of Ramsay Health Care in Australia, and the overall length of stay. This, in turn, improved revenues articulates why some payment reform programs have on a per capita basis, since outpatient care was less costly not met their objectives. than inpatient care. He tells the story of a facility in his hospital chain which, for However, Mr. Rex points out that: “The program was many years, had run a successful inpatient mental health successful in that it moved an amount of care from the facility within a certain region. But when policy makers inpatient setting to the community but with an associated introduced a new capitated payment model for integrated adverse outcome for the inpatient facility.” This is because mental healthcare, the situation rapidly changed. as care moved upstream, net income for the facility declined. And while this was clearly the desired outcome from As the only inpatient provider in the region, the facility’s the policy maker’s perspective, it did little to encourage staff started to create programs aimed at moving patients investment and transformation from those providers whose outwards into community care, reducing inpatient admissions core business model was running inpatient facilities.

There is ample evidence to show Payment reform is key that by organizing care in this way, Perverse health systems and payers can both T he reality is that, in most countries, improve quality and reduce costs. But, current payment systems work directly incentives to date, all signs point to the fact that against the delivery of integrated care. abound in most most healthcare systems are still far Existing payment systems tend to pay from enacting the changes that will for care activities within organizations healthcare ultimately help them realize these rather than rewarding the efforts to benefits. integrate care across them. Similarly, payment instead of paying for outcomes or In our experience, organizations that integrated care paths, payment systems systems. are able to make improvements in usually pay for individual activities the following areas should start to and other input characteristics (such experience major benefits in terms of as beds used or the presence of both health expenditure and outcomes: professionals). Yet most now accept that • More proactive care for the elderly this approach actually stimulates high and people with chronic conditions, volumes of these activities and input including state-of-the-art acute care characteristics, whether or not they add for patients who have suffered from value to the system or the patient. Few strokes, heart attacks, traumas or markets struggle with this challenge other acute events more than the US. • High-level elective care that pays ”In the US, the payment system is significantly more attention to a hostile to any meaningful change,” patients’ preference for non-surgical Arthur Southam, Executive Vice alternatives2 President, Health Plan Operations, Kaiser Permanente, comments. “Virginia • Top-level care for cancer (from Mason almost faced bankruptcy by prevention and early detection becoming very efficient and lean and through to evidence-based treatment) preventing readmissions – it kills you • Integrated and personal maternity financially. In the current system, you care that is not overly-interventionist cannot expect high value care to arise. At Kaiser, we’re able to do the right thing While the evidence in support of largely because we’re not paid by the this transition may be clear, actually piece but by the package.” delivering it is more easily said than done. Indeed, the current state of affairs Addressing perverse incentives within most health systems seems to These same perverse incentives abound show that while these insights are not in most healthcare payment systems.3 new, actual progress has been slow. Yet Even those that have replaced their there is one tool in the payers’ hands ‘pay per piece’ system with a ‘pay per that could quickly catalyze change admission’ or ‘per elective intervention’ and create the necessary conditions system seem to suffer from a clear for change to occur – that tool is supply-induced demand effect. Similarly, payment reform. the option to pay overall budgets achieves little more, particularly when

2 Mulley et al. 2012. 3 Contracting Value: Shifting Paradigms – KPMG International, 2012.

the system draws borders between clear move towards establishing a more structures, so that higher quality care organizations whose services should be ideal model.4 will be delivered at lower cost. more integrated. How to get there, however, will vary The reasons for this far outweigh simple It is clear, therefore, that payment depending on the characteristics of each altruism. According to Mr. Ruff, “It is reform – where perverse incentives system. And while different histories, plain business sense that this expands become more aligned by encouraging regulations, needs and payment systems and sustains markets for us and so the delivery of high-quality, appropriate will all require different approaches, one ultimately is the best way to improve care – is a necessary condition for health thing seems certain: success can only the bottom line.” system transformation. be achieved by moving away from paying Among other things, Discovery Health for inputs, and moving towards paying for But it is not a sufficient condition.I ndeed, has rolled out a coordinating program outcomes,or value delivered. unless more is done to address the for members with multi-morbidity perverse incentives ubiquitous to our From passive payers to and frailty by commissioning and payment systems, any calls for leadership, funding new multidisciplinary teams of cultural change or implementation of best activist change-agents rehabilitation professionals. It is now practices will ultimately fail. For this type and scale of change to piloting dementia services with willing happen, payers themselves will have to collaborators in South Africa, thus Looking around the world, it becomes become actively involved. As Brian Ruff, beginning to fill a need which was not clear that there are several innovative General Manager from Discovery Health previously met, and is actively searching contracting models available to respond South Africa argues, ”Payers have for other opportunities to stimulate to these challenges. So while population- to reverse down their supply chains”. providers to add value. Discovery Health based and episode-based models each Moreover, they must become actively is currently researching the financial have their place (depending on the type involved in the required reorganization feasibility of privately provided, midwife- of care that is being paid for), there is a of delivery patterns and organizational driven maternity services for their lower income members.

Prof. Benjamin Ong, National University Health System, Singapore; Dr. Masami Sakoi, Ministry of Health, Labor and Welfare, Japan; Wah Yeow Tan, KPMG in Singapore

4 Contracting Value: Shifting Paradigms – KPMG International, 2012.

Similar developments are taking place in The story is the same for public the US. Ron Williams, former Chairman payers. In the UK, where the National It makes no and CEO of Aetna Inc. notes: “The Health Service (NHS) has set financial payer no longer sits back, just paying targets, the newly formed Clinical sense paying for bills. [They are] involved in continuous Commissioning Groups will be expected a perfect hip quality improvement now, helping to procure better care for less. Many are providers improve, and in researching starting to recognize that the only way to replacement if best practices. They’re more and more achieve this is by transforming how care interested in improving outcomes and is being delivered. the patient would the care itself.” “We know that we can [improve care], have been better Similar views can be found around the on a smaller scale: we have pushed world. In the Netherlands, for example, down waiting times and reduced not getting the activism has been around for a number venous thromboembolisms, all of years. As Pieter Hasekamp, CEO through smart pressure and incentives operation in the of Zorgverzekeraars Nederland (ZN), from public payer(s) to providers,” the Netherlands’ Association of explains Sir Bruce Keogh, Medical first place. Healthcare Insurers explains: “The Director of the NHS Commissioning activist role of the insurer was at the Board. Sir Ian Carruthers of the NHS heart of the system reform in 2006. adds: “We know that we now have to That was the core idea: insurers would do it on a larger scale…yet we do not be incentivized to selectively contract yet know how – although the Clinical high-quality care and reduce costs, Commissioning Groups will have a working with providers on how to vital role to play.” reach this goal.”

Figure 1: The range of options for payers Focus Approach

Transactional and Partnership/ adversarial/coercive value focused

Micro provider management Micro focus Standardization and guidelines and utilization review Use payment systems and pay for performance

System focus Selective contracting Payers as system planners

Population focus Pay for population health outcomes

Patient/subscriber Restricted networks Incentives for self management focus high deductibles

Source: KPMG International, 2013.

Ed Giniat, KPMG in the US, in conversation with Ron Williams, Former Chair & CEO of Aetna Inc. and member of President Obama’s Management Advisory Board in the US Leading strategies from on changing patient behavior and/or on Setting standards and treatment ‘activist payers’ populations. Below, we have set out how guidelines By examining the approach taken by some of these strategies are being turned The use of evidence-based guidelines some of the more ‘activist payers’, we into action by payers in different systems. linked to payment mechanisms (such as learn that the transactional strategies pay for performance) also creates certain Controlling the detail of utilization that have characterized this sector in challenges by taking the payer into clinical and activity the past will no longer suffice. More territory. As a result, some of the risks Techniques such as pre-authorization, transformational approaches will be that might be – in some systems – held strict treatment criteria and physician needed. The strategic choices for payers by providers, instead rest with the payer. profiling (to target variation) are generally relate to how they want to approach Even with the capacity that most of the well understood. But they can also be the problem. Do they want to adopt a major payers enjoy, scope for change is expensive to operate and unpopular with transactional approach which will often often limited. There is an issue about how providers and patients as they focus on put them in an adversarial position in many different approaches providers can individual episodes rather than value for relation to providers and subscribers? manage and the costs associated with the patient. This not only fragments care, At the other end of the continuum is a this. This suggests that more collaboration but also steers dangerously close to more partnership-based model focusing will be needed among payers to either micromanagement where payers take on on value. There is also the question of agree on standards or use those set by risks and responsibilities that should sit where to focus. Payers can focus on the national bodies. with providers. details of care delivery, on the system, Case Study

FierceHealthcare, a respected daily healthcare newsletter, renegotiated maternity payments for 10 hospitals to cover reports that starting this year, hospitals can get more money the rising healthcare costs and risks associated with the from United Healthcare (an operating division of UnitedHealth procedure. Hospitals also are seeing no reimbursements at Group, the largest single health carrier in the US) if they take all for elective early deliveries from certain insurers, including action to reduce early deliveries without medical cause, as South Carolina Medicaid program and BlueCross BlueShield well as demonstrate lower C-section rates. Similarly, health of South Carolina. insurer Aetna has adjusted prices for C-section surgeries and

Influencing the patient’s behavior shift to other plans and new patients, and choices who have not been in preventative Payers are There are several approaches that programs, replace them. To overcome attempt to change patient behavior by this, a few payers are now working with getting much better directly altering or restricting patient employers to provide services that go at using payment choices. For example, by restricting beyond conventional insurance policies networks to only include providers that by managing health and offering a mechanisms, deliver better value (increased cost- range of preventative and behavioral effectiveness and/or quality) or use health management solutions. This incentives and incentives – such as lower premiums can be linked to incentives such as or deductibles. This encourages lower deductibles, premiums, or other contractual subscribers to accept a choice of fewer benefits. providers and many insurers have found Using payment mechanisms to mechanisms to that they can increase their negotiating change provider behavior power and reduce the use of high cost change provider Generally speaking, payers are providers. For their part, payers are also getting much better at using payment striving to influence patient behavior. behavior. mechanisms, incentives and contractual Some, for example, are providing mechanisms to change provider patients with advance information on behavior. There is a clear benefit to provider costs and quality or on the creating more bundled payments effectiveness of treatment options. and following the patient over longer Others are encouraging patients to periods of time (including recovery, in access lower cost services (such as elective care and for a whole year in going to primary care rather than the chronic care). There is also an advantage hospital) through co-payments and to integrating doctors’ costs in these other incentives. bundled payments. Likewise for primary Prevention care, including basic home care for While there are some experiments the frail elderly, and fully capacitated where payers incentivize subscribers payment models (paying a fixed fee per to adopt preventative health behaviors, patient in the population per year). some payers have found that an Yet these tools may have started to investment in prevention may not pay reach the limit of their usefulness as back, largely because subscribers often Case Study

Safeway Stores (a large pharmaceutical chain in the US), cost estimates for a procedure and the amount already Unite Here Health (a health benefits trust in the US), and the spent toward their deductibles that are specifically based on employee health plans of some states and cities (including their health plan. Meanwhile, Blue Cross (a health insurance California, Massachusetts, Minnesota and the city of Los organization based in the US) is rolling out a new cost Angeles) all use patient communications and strong patient estimator tool called Find a Doctor to help its members find incentives to move market share to higher-value providers. providers and compare out-of-pocket expenses for more than 100 medical services. It is also preparing a ‘very plain English Harvard Pilgrim, a full service health benefits company, is version’ of its explanation of the benefits form. launching an online software application this year called Now iKnow, which ranks doctors and hospitals based on cost and Source: New England Journal of Medicine, 2013; 368:1-3. quality. The online app will give members options, including

Delegates include: Glenna Raymond, Ontario Shores Centre for Mental Health Sciences, Canada; Lisbeth Norman, KPMG in Norway; Unni Hembre, European Federation of Nurses Associations, Belgium; Sir Jonathan Michael, Oxford University Hospitals NHS Trust, UK; Sir Bruce Keogh, NHS Commissioning Board; Sir Robert Naylor, University College London, Hospitals NHS Foundation Trust, UK long as we do not incorporate the management – an idea that lies at the of patients and take some of the risk outcomes that these care activities root of many of the Accountable Care through capitation payments or models deliver. Importantly, this includes the Organization initiatives in the US. For where one provider becomes the appropriateness of the care: it makes others, however, that shifts too much of coordinator of the patient pathway. In all no sense paying for a perfect hip the insurance risk to providers, and just these scenarios, the outcome of care is replacement if the patient would have recreates clunky, old regional budgets what the providers must sign up for. The been better off not getting the operation for single provider systems – with all range of options for payment models in the first place. the problems they entail. Whichever and the implications for the shape of the path is taken, providers will have to providers is illustrated in the framework For some payers, this means stopping increasingly take responsibility for below in an analysis of the US market by any mechanism that pays for volume, a population or an identifiable group the Commonwealth Fund. and shifting wholesale to full population

Case Study

Discovery Health South Africa’s Vitality program is designed often being free. These are typically lifestyle promotions to incentivize members to be more committed to wellness by such as deals on flights, hotels, car hire as well as discounts earning points for exercising, eating healthy foods and hitting in many stores. Wellness promoting behavior is also made physiological targets. This is done through a unique system easy because the size of the member base allows Vitality to based on the science of behavioral economics wherein negotiate discounted access to gyms and retail food outlets members are provided with a range of immediate incentives as well as a wide range of health promoting partners. Vitality similar to a consumer loyalty program. goes much further than similar schemes in richer countries; currently the scheme is paying for itself. The more points earned, the steeper the discounts in accessing the rewards, with the top of the points range

Figure 2: Options for organizations in the US

Outcome Full population measures; prepayment large % of total payment Continuum of P4P design Less Global case Feasible rates Care coordination and intermediate outcome measures; More moderate % of total payment Feasible Medical home payments Simple process and

Continuum of payment bundling Continuum of payment structure measures; small % of total Fee-for payment Small practices; Independent practice Fully integrated service unrelated hospitals associations; physician delivery system hospital organizations

Continuum of organization

Source: The Commonwealth Fund, 2008.

The payer as market manager there have been successful examples of Payers are starting to use selective insurance companies acting in this way We’re learning contracting techniques to influence the to reshape the system. shape of the provider system. In the Blurring the payer/provider divide that a partnership – Netherlands and the UK, for example, There are several cases where a payers are using standards set by with sharp edges perceived market failure has forced professional bodies to refuse to contract payers to also take on a provider role. with small volume providers and require where necessary – So while the payer/provider split may the centralization of specialist services. be a neat concept to policy analysts, is the best model. In the US, Starbucks is moving key parts reality has shown that the concept of its care for employees on the west is becoming increasingly blurred, coast to Virginia Mason and patients are particularly in cases where payers flown to Seattle for some cardiac and are filling a gap in the market or using back surgeries. In some cases payers new providers to disrupt some of the are acting as the strategic planners for current patterns of service delivery. For areas in which they operate. This is well example, one Dutch insurance company established in the UK, Scandinavia, Italy set up integrated primary care practices and other systems with strong regional in areas where general practitioners or national authorities. In the Netherlands wanted to participate, leading to proven

cost reductions through better referral outcomes. in time we might expect tension in the partnership remains and prescribing habits. there are these data sources to increasingly essential. some similar small experiments with cover issues of prevention and use ”the painful moments will come this in South africa. in the US, optum data to facilitate and incentivize patient when the waste is really pushed out of Health Solutions works with employers engagement in their own healthcare. the system; when you cannot help the to reduce costs through better ”Such partnerships are beginning to hospitals to survive relatively easily; care management, prevention and come to the fore in the US now,” says when organizations will simply not psychological support to their insurees. ron Williams, former Chair & Ceo of make it. Yet we have to face that,” says A partnership with a healthy aetna inc. and member of President ron Williams. ”With many of our larger tension obama’s Management advisory Board. hospitals, it is much more likely that Payers may be wondering how they “this is quite something, because they will be thoroughly transformed might become more activist in their payers and providers used to fight than that they will just fall over and current environment. Clearly, neither each other to the ground until only a die. and we can help them with that an overly confrontational attitude of few years ago. that was the default, transformation – we must.” “i’m going to transform you”, nor they were enemies. that is changing Perhaps the most important an approach that simply appeals to now, enlightened payers understand partnership in the future will be a sense of social responsibility to collaboration is the only way to create forged between patients and the encourage cooperation will work. more value.” wider population. Supporting patients there is simply too much at stake. Pieter Hasekamp, Ceo of the in managing their own health, this does not, however, mean that Health insurers association in the coordinating their own care and providers and payers cannot create a netherlands, adds: ”We’re learning that facilitating their participation in key model for partnership that recognizes a partnership – with sharp edges where decisions has huge potential. the functional and healthy tension necessary – is the best model. Just between the two parties. Much like ‘tough negotiating’, seeing each other as many supplier relationships found in adversaries, will not work, that’s clear.” industry, partnerships are a logical Cost sharing model that allows providers and payers as overall healthcare spending in most to rally around a common goal of countries is expected to increase over providing first-class services to their the coming years, both payers and mutual clients. providers can reasonably expect their Data sharing market to grow. indeed, there are not in many countries, insurance companies many sectors where conditions for and providers have taken a strong first constructive partnerships between step towards this goal by sharing their payers and providers are so good. data. in many cases, professionals in this market, payers may consider and providers are simply unaware of sharing some of the costs for necessary the outcomes of their care, or how transformation processes, or supporting these outcomes compare with the providers as they go through a prices they charge, and so payers can temporary dip in revenues. make a significant difference just by of course, partnerships do not showing them their results. this will come without risks. For instance, require linked data sources between payers will want to ensure that they providers and insurers, which are do not become overly entangled often best managed through a trusted with pre-existing providers for fear of third party (ttP) solution due to obstructing the disruptive change that regulatory concerns. this, in turn, lays might be required. Clearly, a healthy the groundwork for incentivizing good

Key take away points for payers There is a strong logic influencing the way that payers are adapting and changing; based on this logic, the steps they need to take are quite clear. • Pushing care upstream (towards prevention, self-management and home care) has become the clear mission for everyone who wants to increase quality while reducing overall healthcare costs. This will mean finding new aysw to connect to patients and influence their behavior, which includes being more active in the management of their conditions and adopting more healthy lifestyles. To make this possible, delivery models need to become more integrated which, in turn, means that current payment systems (that maintain fragmentation and pay for waste) urgently require reform. And while there are choices about how much risk should be transferred to the providers, it is clear that much more attention must be placed on the management of population health. • Public and private payers increasingly find themselves in the driver’s seat; they can play a crucial role in realizing payment reform and influencing provider behavior. They are becoming increasingly engaged in actively pushing care upstream themselves – whether through interacting with providers or with their own clients. • Incentivizing change will be essential. Change can be hard and the pain of that change should be shared between payers and providers. Payers will need to be open-minded and creative about how they support and incentivize providers in both the medium to longer term. • Up-skilling in key areas such as data analytics, outcomes measurement, contracting, and care system design will be key, as will the inevitable leadership complexities that arise when moving from a traditional passive payer to a leader of the system.

Orsida Gjebrea, Supreme Council of Health, Qatar

Case Study

De Friesland Zorgverzekeraar – How the insurers took the What did they do? lead in reshaping hospital care DFZ took a coordinating role by working with healthcare This initiative started when De Friesland Zorgverzekeraar providers in the region to shape networks of care for critical (DFZ), a Dutch healthcare insurer primarily active in the care and care close to home. The networks of care included: northern part of the Netherlands, had the ambition to emergency and intensive care, birth care, oncology, complex provide the right care at the right place at the right time, now vascular care, elective care and chronic and elderly care. and in the future. The burning platform for this ambition is a How did they do it? set of familiar challenges including a rapidly aging population, a lack of specialist doctors and nurses and the risk that To realize this ambition they set up a program with: small hospitals will not be able to meet quality and volume • A steering committee intending to reach common requirements. decisions, consisting of: an independent chairman, the A driving force to realize the ambition was the outline board of directors of DFZ, CEOs, chairmen and board agreement between the Association of Dutch Healthcare medical staff of the five hospitals, a board member of the Insurers, healthcare providers and the government, which regional university medical center, patient and general made the health insurance companies primarily responsible practitioner representatives and KPMG; for improving quality and efficiency.T his changed the role of • A program office, consisting of DFZ and KPMG employees; healthcare insurers that could become commissioners of care with a strong responsibility for appropriateness and continuity • Seven expert groups, which made proposals for change. of care in the region (a sort of private organization with some Every expert group consisted of a chairman (an independent, parallels with regional health authorities). DFZ was one of the leading medical specialist), representatives of the hospitals, first to pick up a leading role. While some health insurance general practitioners and representative of the patients; and companies used purchasing power to negotiate with • a ‘Council of Experts’ which could provide the steering providers, DFZ had a strong commitment to cooperating with committee with advice upon request, consisting of national the providers in the region. It was their belief that only in this recognized governors/medical leaders. way could change of such magnitude be realized sustainably.

Phase 1 Phase 2 Phase 3 Phase 4 & 5 May−July 2011 July−November 2011 December 2011−June 2012 July 2012−February 2013

Business cases (regional level & multi- Preparation annual budget per hospital) of the Data collection and Exploring and program: GAP analysis developing scenarios Getting Decision-making acquainted Conditions from governance perspective

Source: KPMG International, 2013.

What decisions were made? • DFZ composed their healthcare procurement plan for 2013. • The pathway approach is delivering authoritative care plans, In this plan the first irreversible steps towards the future based on proven data and financial modeling, overturning were made. For instance, no contracts will be made with legislative, practitioners and administrators’ assumptions certain providers for some forms of complex care if quality on healthcare and the supply agreements. In particular, and volume requirements can’t be met. the insurer has reduced its use of complex care contracts where providers could not guarantee its new volume and • First fundamental decisions on scenarios. care quality targets. What were the lessons learned? • DFZ’s new program is already having a profound effect on • Speed during the process is necessary, but too much speed commissioners, providers and patients. Local treatment is detrimental. centers are more accessible to elderly patients. Primary care teams are working more closely with the new care • A program of this magnitude can count on attention in the centers and hospitals – providing better, multi-disciplinary local media; make clear agreements on media handling. care closer to local communities. • Importance of independent chairs for expert groups; • Friesland’s new primary care-led network is lifting demand bringing in independent professional medical leaders is an from hospitals, with a 40 percent substitution from acute to important driver for change. care beds in one case. • The program brought the professionals and the clients/ • Improved quality of care with better targeting and reduced patients back in the lead. Management follows costs; the program’s comparison of GPs found those with professionals – as one expert said, “We are currently highest quality results also had the lowest costs. realizing something that our management should have done 10 years ago.” • DFZ is now commissioning services more flexibly in line with anticipated local care demands because of the • Relocating the care in the network will result in increasing pathways’ comprehensive number-crunching. DFZ also has pressure on primary care. the model to transform its cost base as well as those of its • Importance of maintaining the project infrastructure after provider hospitals in the next few years. ending the program; creating a platform for collective • ‘Incentivized’ patients are becoming more active partners in innovation from professionals. the management of their own healthcare. Outcomes • The program put the professionals and the clients/patients • DFZ has delivered new medical centers that better connect in charge. primary emergency treatment; the centers claimed top • Management follows professionals – as one expert prize in the Friesland patient representative body’s latest said: “We are currently realizing something that our annual healthcare awards. management should have done ten years ago.”

Lessons from high-growth health systems

T hree key words perhaps summarize what we can observe a role in chronic disease management where lifestyle and in the immediate and near-term future for emerging markets: behavioral changes are important. In a way, “green fields” growth, buzz, and leapfrog. and “white spaces” in underserved regions and countries offer more opportunity for truly disruptive innovations, which Almost by definition, emerging countries are experiencing are often simply new ways in which a product or a service is economic growth while most of the developed world produced, delivered, used or valued. continues to face a slowdown which looks increasingly to be long-term. Populations are still growing at a fast clip, and Indeed, we can expect to see healthcare technology adoption with populations that are both growing and aging, some and innovation in emerging markets leapfrog their more countries are experiencing the ‘double barrel’ impact of public developed cousins, and not just play catch-up. This can already health issues. Increasingly crowded urban centers, changing be seen in telecommunications in developing countries, lifestyles and diets can be linked to a chronic disease where the ubiquitous mobile phone has replaced landlines to epidemic among the middle-class, who also come with higher provide connectivity reaching into the most rural of areas. and harder to meet expectations. There are advantages of being a follower – not being Emerging healthcare trends in high-growth markets: burdened by the past or historical policies and structures, and the opportunity to learn from and not repeat the • Focus on prevention and primary care; mistakes made by developed countries which have • Technology is seen as a key enabler to accelerate growth treaded the well-worn path of traditional healthcare and is being rapidly implemented; system development. Already, we see electronic medical records and broader electronic health records impressively • There is much less nervousness about using private-public implemented in hospitals and systems in India, China and partnerships; other developing countries. Mobile health in rural settings, • Providers in these markets work their assets much harder; and retail-based clinics and other dis-intermediation models are thriving where primary care is weak. Low-cost delivery • Greater willingness to try innovative or novel approaches. models and point-of-care diagnostics and interventions Within healthcare, as a fast-growing sector, the buzz is are capturing the imaginations of care providers, drug and palpable. There is increasing private sector involvement device manufacturers and investors alike, and may well lead and a rise in the number of public-private partnerships, the next wave of “reverse innovation” which could see the as many governments realize their need to rely on private developed world learning valuable lessons from their upstart finance. New models for funding and financing healthcare cousin nations. are constantly being experimented with and implemented. This is the space to watch and the scale and speed of change We are seeing innovative use of information technology, is extraordinary. the rise of remote care delivery models (through tele-care, mobile health and the like), and social networking playing

Providers: transact or transform?

Prof. Benjamin Ong, National University Health System, Singapore

A s payers become more activist, But looking around the world, we see the role of the provider is also being mounting evidence that the status quo challenged by old and emerging cannot last. Even in the fastest growing pressures. How should providers react emerging economies, the current to the rise of ‘activist payers’? How system seems in trouble. Indeed, the will providers adapt to demographic writing has been on the wall for some and epidemiological change? What is time, but it is only now starting to get achievable given the ongoing financial tough. Provider executives in emerging and economic challenges in most parts economies and systems that are still Looking around of the world? growing have an opportunity to leapfrog some of the outdated models in the At KPMG’s global summit, a number the world, we see more established systems. of providers from various regions mounting evidence suggested that the current model For providers, today’s challenge is to actually delivers strong margins for some balance the pressure of becoming that the status quo hospitals. Why should they change, they as efficient as possible within their asked, if profits are still flowing? current models, while creating the cannot last. right environment for transformational

change to new models. For some, Over the following pages, we will look of the root causes of poorly-executed this will lead to a more integrated at the different components of each M&A transactions come down to three system; for others, different options strategic option to show how providers main mistakes: a lack of clarity about the will emerge such as specializing or across the globe are adapting and objectives, failure to conduct rigorous focusing their operations. Just about advancing their strategies. due diligence and a lack of attention the only option that is not on the to culture change and integration both “What we can learn is that regardless table, however, is to do nothing. Our before and after the merger. of what payer system we’re in or what delegates were clear that bold and national scheme we’re in… at the root is That is not to say that mergers cannot innovative approaches would need to how do we care for people and how do be effective. Indeed, some jurisdictions be combined with forward thinking and we motivate those people who do the have enjoyed strong success by using (in some cases substantial) changes to caring,” says Dr. Kevin Smith, President mergers as a strategy to shrink the operational and business models for and Chief Executive Officer of St. Joseph’s overall size of the hospital system. In real and lasting change to emerge. Health System, Hamilton, Canada. the Canadian province of Ontario, for At the outset, providers will need to example, the government imposed consider their objectives and future Developing new consolidations on independent hospital strategies based on two main sets of strategies corporations and, as a result, reduced considerations: what markets they the number of providers from 220 to Continuing to grow and improve want to operate in (both in terms of 150, while also closing 35 individual In some markets, there is still the geography and products) and whether hospital sites. opportunity to grow the current model improvement or transformation is while driving improvements across Expansion into new markets required. This will invariably lead operations and delivery. But above There are a number of ways providers providers to three broad, overlapping and beyond the organic growth that can take advantage of new markets to sets of approaches: will naturally come from changes in drive growth. In the US, for example, • Continue to grow the current model demographics, aging populations and a recent health tracking study found while improving operations and epidemiology, many providers are that in all 12 markets studied, hospitals delivery; keen to explore new opportunities for employed one or more types of rapid growth. geographic competitive strategy, • Adopt new approaches built on including buying or building full-service existing models; or Mergers and acquisitions hospitals or freestanding emergency For many providers, the purchase and • Develop very different models for departments, buying or establishing consolidation of facilities and services new or current markets. physician practices, and developing a remains a highly popular growth regional presence through emergency Regardless of the approach, the scale strategy. When fully realized, M&A can medical transport systems.5 of change is huge. Opportunities bring reduced costs through the sharing abound for those providers prepared to of functions, improved market power In most cases, the aim of expansion move ahead, take risks and try to shape and greater negotiating clout. In other is to improve efficiency and capture the future rather than respond to it. In cases, governments and payers have additional patients with more some cases, the ambition and pace of looked to M&A as a solution to poor advantageous reimbursement rates. change (particularly in the emerging service quality or financial failure. But However, many payers fear this strategy economies) has been breathtaking; in there are significant challenges with will lead to price increases, a notion other parts of the world, progress has conducting M&A, and the track record supported by recent data on mergers in been slower to come. in the health sector is not impressive. the US market. According to KPMG research, many

5 Emily R. Carrier, Marisa Dowling, and Robert A. Berenson-Hospitals’ Geographic Expansion In Quest Of Well-Insured Patients: Will The Outcome Be Better Care, More Cost, Or Both? Health Affairs 31, No. 4 (2012): 827–835.

There are numerous examples of this alliance with Kirloskar Group, a strategy at work around the world. major supplier of high-tech medical Most equipment based in India to develop • Facing restricted growth general hospital services. The opportunities in their domestic healthcare partnership works because of the market, Ramsay Health Care in advantages that each party brings to Australia looked for opportunities to providers still have the table: Toyota Tsusho can mobilize take its operating model into different a global network and rapid business ample opportunities environments. The organization won development capability; Kirloskar contracts to deliver elective surgery Group brings its local knowledge to improve their in the UK, acquired a 57 percent stake and networks; and SECOM brings in French operator Groupe Proclif SAS quality and margins. operational expertise. (now known as Ramsay Santé SA), and is now actively looking for further • In many markets, expert operators acquisitions in other markets. are taking over the management of public hospitals or bidding for • Narayana Hrudayalaya, a group of contracts in service areas that, health centers based in India, is traditionally, have been the exclusive adapting its model to support entry preserve of the public sector but are into a number of different countries, now being moved into the private including the Cayman Islands, which sphere to reduce government liability has given the organization quick and investment. access to the huge US market without the daunting regulatory hurdles. The success of any expansion into new markets relies on the organization’s • India’s Fortis Healthcare Limited ability to effectively transfer their and the Apollo Group have both management model and methodology. leveraged their clinical leadership in To achieve this, organizations will new markets to build new hospitals want to ensure they secure a majority throughout the country and across stake in any takeover, or win long-term the Asian region. concessions that allow sufficient time • In Japan, SECOM Co. Ltd. a leading for new approaches to be applied security firm, and Toyota Tsusho and investments to be returned. Corporation, a trading and supply Those expanding into new foreign chain specialist, have formed an markets may also consider creating

Cynthia Ambres, KPMG in the US and Marc Berg, KPMG in the Netherlands.

joint ventures with local partners as a partnership where an ‘activist payer’ can images, laboratories and the operation of way of navigating often complex local help to unlock change. specialist clinical services such as dialysis, regulatory regimes while securing mental health, chemotherapy and even Outsourcing clinical and non-clinical organizational capabilities in marketing, intensive care. Philips eICU (part of Royal services staffing and adjusting to local culture. Philips Electronics of the Netherlands, Outsourcing non-clinical services is a diversified health and well-being Redesign and improvement certainly not a new phenomenon. company), for example, provides remote In many systems it has been easier to Indeed, in mainland Europe, providers support to a large number of community focus on improving revenue. Reducing have a long history of outsourcing hospitals in the US. costs is difficult but techniques for doing functions such as cleaning, laundry this, and the areas where there is the and catering. Over the past few At the same time, the approach to most scope, are generally well known. years, there has also been a strong outsourcing has matured significantly In our experience, most healthcare trend towards the outsourcing of key over the past few years, leading providers still have many opportunities operational functions such as facilities to a much wider set of models to improve their quality and margins. management, office services, financial for improving value and efficiency However, the more adventurous of functions, IT systems management, that go beyond simply outsourcing these strategies may well require the transactional components of human individual function areas. Indeed, many collaboration with other organizations, resource management, procurement organizations are now taking a much especially where there is a need to and logistics. more strategic approach to outsourcing reshape the whole local health system, by considering their various options Today, there is growing interest in for example through the closure of sites. against the importance of the process moving outsourcing closer to the front This may be an area of opportunity for to the business and the extent of the line in areas such as sterilization, patient improvement required. transport, pharmacy, imaging, reporting

Figure 3: Strategic decision-making on outsourcing

Core

Continuously Re-engineer Innovate and ally improve

Co-source/ Fix structural Transformational micro-captive/ defects outsource BOT/captive shared services Process criticality

Simplify/streamline/ Transactional Alliance/JV out-task/staff outsource/ outsource augmentation offshore

Non-core

Poor Excellent Process performance

Source: KPMG International, 2013.

Getting the best out of the workforce Building new approaches Given that the most significant costs While all for most healthcare organizations stem on existing models from the workforce, it is not surprising Quality improvement at scale organizations aim that many providers are seeking ways While all organizations aim to improve to increase productivity and enhance quality and efficiency, some are to improve quality employee efficiency.T his will, in turn, using quality improvements to create and efficiency, require providers to pay closer attention transformation on a much larger scale. to job design, pay and conditions, • Intermountain Healthcare, a hospital and developing the basic systems to some are system in Utah and Idaho, uses improve workforce management. measurement, data systems, using quality However, we have also noted a pathways, process improvement and fundamental shift away from crude structures to enhance accountability improvements approaches to reducing cost, focusing and – as a result – has made major instead on more strategic options based to create cost and quality improvements. Just upon engagement and improvement. one of its new protocols to reduce According to our research, leading transformation unplanned caesarean sections and providers exhibit five key habits to drive induced labor, for example, saved efficiency and productivity. on a much larger USD50 million in Utah alone – scale. 1. A strategic focus on value for equivalent to USD3.5 billion across patients is embedded into the DNA the US.7 of the organization and reflected in • The Geisinger Health System in the recruitment, staff objectives, Pennsylvania is focused on removing appraisals and reward systems. unjustified variation, fragmentation of 2. Professionals are empowered to care and poorly-designed incentives take responsibility for creating as a way to move patients from value, supported by a focus passive to active recipients of care. Its on teamwork, the granting of ProvenCare products offer advanced appropriate autonomy, control over primary care (a medical home), care work processes and high-quality bundles to ensure reliable chronic leadership at the front-line. disease management, improved transitions of care, warranties for 3. Task and process redesign is some treatments (those in which the encouraged and supported. system delivers best practice) and 4. Staff performance is actively evidence-based care. The product also managed using outcome measures. takes responsibility for complications. 5. High-quality staff management • In Sweden, the Jönköping County practices are embedded into the Council’s health system has a operating model of the organization.6 25-year history of using quality as their key business strategy. This ‘whole system’ approach is based on a culture of systems thinking, process improvement and the development of a learning system.

6 Value walks: Successful habits for improving workforce motivation and productivity. KPMG International, 2012. 7 Brent C James & Lucy Savitz – How Intermountain trimmed healthcare costs through robust quality; Health Affairs May 2011, doi: 10.1377/hlthaff.2011.0358.

The Trillium Health Centre in Ontario, the entire health system to support their answer may be for hospitals and other Canada has taken a similar approach. Patient First Review. providers to be encouraged to enter the market. Another option would • Salford Royal NHS Foundation Trust However, it is also worth noting that be for primary care to become more in the UK has used patient safety as some initiatives have met with less specialized or to focus on particular a key driver for improvement in their success, suggesting that the model for segments of the population. However, organization. scaling up quality improvement is still in many countries, the model of poorly understood. • The Institute for Healthcare primary care is currently not set up to Improvement in the US and Integration adapt to meet these challenges. the Initiative Qualitätsmedizin The definition of this ariesv between Hospitals and health systems do collaboration in Germany, Austria systems, but at its heart the strategy have the potential to develop new and Switzerland have also found aims to offer coordinated care across partnerships to support home care benefits to being part of a wider the whole patient journey. As payers providers and residential and nursing network for improvement. start to move towards purchasing homes to deliver a range of services outcomes and value rather than In examining the practices of these such as: improving care for patients, individual interventions, more risk is organizations, we have found that medicines management, end-of- passed to providers, thereby making a success in this area relies on the life care, and the prevention and compelling case for ensuring that care consistent implementation of a wide management of acute illness. Closer is properly integrated. The US offers range of interventions over a long period working relationships with mental strong case studies of how changes in of time. Moreover, the ability to define health services can also reduce payment methods and payer policy can and measure value while developing hospital admission and the length drive organizational strategy and design. a methodology to help staff and front- of stay, particularly for older people We have also noted growing interest line leaders to make improvements is with dementia. Similarly, depression in Europe and elsewhere in getting vital. For example, the Virginia Mason and anxiety are important aspects of providers to be more accountable for Medical Center in Seattle and the chronic disease and, by ensuring high- outcomes for populations. (See below.) Royal North Shore Hospital in Sydney quality mental health support for these have both successfully deployed lean Hospitals into health systems patients, providers can help to reduce methodologies to strip out non-value The question is how to build a better their use of other services substantially. adding activities and streamline pathways. system without losing the advantages Clearly, hospitals will need to make a In Canada, the province of Saskatchewan that primary care can offer. One concerted effort to reach out to – and is now rolling out lean processes across work with – these service areas. Different definitions of integration

Payer driven integration: The Blue Cross Blue Shield and social care provision. France and Sweden have both been (BCBS) Massachusetts Alternative Quality Contract and experimenting with various types of provider networks for BCBS Michigan Physician Group Incentive Program have an chronic disease. organized system of care programs that incentivize physician Provider-led integration: In the US, our research suggests groups and hospitals to collaborate in order to produce that many providers will quickly move to integrate with improved outcomes. A number of payers in Europe are also medical groups. There is also increased interest in hospital promoting vertical disease management and models that systems acquiring primary and ambulatory care, home improve the primary/secondary/rehabilitation interface. health, skilled nursing facilities, rehabilitation and other parts Government driven integration: Scotland, Catalonia and of the supply chain. the Basque regions of Spain are creating integrated health

It is worth noting that it is not always standardized approaches that take necessary to create new organizations advantage of economies of scope While the or restructure them to provide and scale, emulating developments integrated care. Indeed, the key in other sectors.8 This goes well technical aspects components of a new system are more beyond sharing back office services of integration focused on creating the right processes, and procurement by focusing on the systems and ways of working than they development of networked approaches are certainly are about governance. to laboratories, imaging, shared specialist expertise and the use of large While the technical aspects of volumes of network information. As a important, it integration are certainly important, result, these organizations are refining it is the cultural component that is is the cultural and improving processes as a key perhaps the most critical element. source of competitive advantage. In In other words, organizations will component that is some markets, such as the UK and the need to develop effective ways for Netherlands, networks are also seen as professionals to work together, taking perhaps the most mechanisms for rationalizing capacity into account their differing approaches and regionalizing specialist work. critical element. and attitudes to risk. Networks may also be made up of This may be particularly difficult for individual sovereign organizations that hospitals whose costs are locked into come together to organize particular buildings and infrastructure. However, services in areas where it is necessary change is ongoing: some forward- to share scarce expertise or have looking hospital boards are starting to referral pathways for complex patients. recognize their organization’s role in not Some challenges do exist with this only running health systems, but also model however, particularly in decision- in taking responsibility for the health of making. Experience suggests the drive the population. to secure the full benefits of networks Networks often requires a single management In a well-known article, American structure for the network which allows surgeon and journalist Atul Gawande individual operating units a high level suggests that there is a growing of autonomy to respond to their local trend towards creating networks of market. The US, in particular, has been hospitals with the potential to develop active in this area, led by private equity

Prerequisites for an integrated system

• A clearly defined population. • Shared records. • The ability to stratify risk reliably and develop registries. • Shared quality governance arrangements between participants. • Accountability for outcomes, supported by aligned contracts and incentives. • Payment mechanisms that support these arrangements. • Systematic clinical care. • The development of a workforce with new skills including the ability to manage multiple morbidity including dementia • Staff and systems to support coordination. and work in multidisciplinary teams.

8 http://www.newyorker.com/reporting/2012/08/13/120813fa_fact_gawande

Georgina Black, KPMG in Canada in conversation with Christine Roughead, KPMG in the US groups who are purchasing community differentiation of services on quality. At • For-profit organizations – such as hospitals to create chains. It is, however, the same time, fully-fledged academic the Apollo Group in India, who have too early to tell whether this strategy health networks may also be able to research and academic excellence as will succeed. leverage large amounts of additional a key part of their strategy – are also research funding to create efficiencies in focusing on specialist areas. A number of attendees of our healthcare service delivery. summit also noted that they were Asian hospitals, in particular, seem well engaged in developing informal There are a number of existing positioned to take advantage of their networks, including: approaches to achieving this. research and academic links, often supported by significant government • International networks that link • Charité-Universitätsmedizin Berlin, a and commercial backing. Singapore is those institutions undertaking major university hospital in Europe, making progress and forging powerful very specialist work in order to has a close collaboration with collaborations with academic centers achieve efficiencies in research and pharmaceutical giant Bayer to support in other parts of the world, while South pool expertise for image reading, drug development. Korea has become an increasingly interpreting results and advice on • King’s Health Partners, an academic powerful player with big investments complex cases. health sciences center in London, has at the Yonsei University Health System, • Networks that provide increased brought mental health together with the Severance Hospital and the Asian reach for referrals and the opportunity acute hospital services in order to align Medical Center. Their experience to extend the brand of centers of their research interests with the main shows that, in addition to large excellence. burden of ill health in their community. caseloads, networks and specialist expertise, the ability to mobilize large • Networks for learning and sharing, • UCLPartners, an academic health databases that will allow the study of largely made up of aligned sciences partnership in London, complex factors in big populations will international players. is building on areas of clinical be a key competitive advantage for excellence and conducting strong Hospitals as healthcare hubs providers going forward. translational research through Following the logic of outsourcing and participation in a network that According to Claudio Lottenberg, networks, some small hospitals may find goes beyond the boundaries of the Chairman of the Albert Einstein benefits from becoming an outsourced hospital. Israelite Hospital in Sao Paulo, venue for care delivery by granting other Brazil, “Things that I thought were providers concessions for hospital space • The Karolinska Institutet in Sweden, happening just in my country, we can and service delivery. That being said, the Mayo Clinic in the US, Partners see all over the world. One of the this route can create some interesting HealthCare in Boston, the University most important learnings for me is complexities and may be easier to of California, San Francisco Medical the importance of adding value for achieve in situations where the hospital Center and Johns Hopkins Medicine those that are going to take part in the is part of an existing network. have a similarly broad multi- resolution of the problem. Doctors… specialty approach. Research and academic links have to be more and more involved For those providers closely aligned to • The Cleveland Clinic, a not-for-profit because they are close to the patients research universities, opportunities exist organization operating in the US, and can be the best teachers and explain to develop academic networks that not offers a strong example of a focused what quality really is.” only provide competitive advantages strategy capitalizing on their expertise in recruiting, but also allow for the in specialist areas.

New models are emerging Coxa Hospital for Joint Replacement While some providers adapt existing (orthopedics) and Singapore’s Fortis The health sector models to create new benefits, others Healthcare, which has recently opened are building entirely new models a hospital purely focused on colorectal seems to lag far that stand in stark contrast to the conditions. Others are focused on behind other sectors traditional hospital. specific patient sectors such as Vaatsalya in India which has developed Focus a low-cost model focused on delivering of the economy in Organizations implementing strategies care to middle-income patients based where providers focus on a process on high utilization and streamlined their ability (or (e.g. ambulatory surgery or imaging), a processes. willingness) to procedure (e.g. cataracts, heart surgery, hernia repair or joint replacement), or LifeSpring Hospitals Private Ltd. in India move services to a disease area (e.g. kidney disease) all offers a strong example of this strategy largely follow the same five-step process, at work. The organization offers low-cost online, telephone as outlined below. maternity care using high throughput units where non-clinical tasks have 1. they gain deep skills in a limited and other modes. been removed from clinicians, cases range of activities and create single that need high-cost interventions are processes that do not interact or transferred to a specialist unit, hospitals overlap. are leased rather than bought or built, 2. They standardize as many activities, and outsourcing is extensively used. consumables, implants and operating Channel shifting procedures as possible. Kaiser Permanente, a US-based 3. They develop approaches to healthcare consortium, is aiming to shift continuously improve their many of its patient contacts to online or specialty areas. telephone channels. To achieve this, they have created a graduated approach that 4. They redesign work processes spans a range of different interventions and shift work to the most designed to improve care coordination appropriate level. (see figure 4). Kaiser already uses 5. Finally, they move to high video conferencing to provide specialist utilization models that ensure input to consultations with family that only the equipment needed doctors, internists and other front-line for the range of activities is clinicians. Similarly, the Veterans Health purchased. Administration in the US enjoys very high rates of virtual contacts. However, for a focused strategy to work, providers must have access to However, in our experience, the health high volume markets where consumers sector seems to lag far behind other are willing to travel for reduced price and sectors of the economy in their ability (or improved quality. willingness) to move services to online, telephone and other modes. And while Well known examples of this approach the use of applications running on smart can be found at the Shouldice Hospital phones and tablets is starting to make in Canada (hernia repair), India’s some inroads, evidence shows that few Aravind Eye Care System and Narayana organizations have embedded these Hrudayalaya (cardiac), Finland’s technologies into their strategy.

Figure 4: New approaches to coordinating care Hospital with Kaiser Permanente – Coordinating care in many settings hospital-based speciality care Micro-hospital

Specialty hub with primary care HIGH Primary care • New venues to access healthcare with ancillaries • Changing paradigm of time and distance • Personal technology Micro-clinics

Employer clinics

Mobile services

Tele-medicine • Capital investment Home as • Resource intensity the hub • Length of implementation

Web

Mobile health

LOW

Source: Kaiser Permanente, 2012.

Disintermediation Strong examples of success do exist, Particularly in regions where primary In other industry areas, organizations however. MedLion Direct Primary care is poorly developed, we have also are reducing costs and increasing value Care, a health insurance company seen the rise of approaches that take by taking steps out of the supply chain. in California, has contracts directly primary care out of the value chain by But this approach seems – to date – to with employers. WhiteGlove Health, offering vertical disease management be less prevalent in the healthcare a medical care provider based in programs, direct access to specialists, sector. However, the growth of retail- Texas, offers a similar model but and vendors who can provide based clinics with a narrow repertoire with a telephone front-end and the screening services directly to the of diagnosis and treatment services offer to come to the patient’s home public. Similar examples arise in cases for primary care conditions, remote or workplace. In both examples, the where the primary care service values pharmacy with postal fulfillment and provider has essentially removed are not a key part of the service, such other potentially disruptive models the need for insurance claims to be as in the Parkinson.net example in the will increase over the coming years, made for the use of primary care and next chapter. bringing both threats and opportunities eliminated the retail pharmacy from the to sector participants. value chain by using postal fulfillment.

Patients and their networks as a cloud to assemble, analyze and share source of value data in real time will be critical in We have seen As other service industries move building successful partnerships and to involve the consumer into the affiliations between payers, providers growing interest production and design of products, and patients; will transform the way from providers in we have seen growing interest from patients move through the care providers in working with patients to pathway; and will deliver tremendous working with redesign care pathways. Other ideas insight to payers on the performance are also starting to trickle into the health of their contracts. sector, such as self-serve models in patients to redesign And while the cloud will require health which the customer does much of the systems to understand and manage big care pathways. work, supported by technology and issues like enterprise security, identity online tools. management and network management, For the health field, this approach it is clear that Big Data and cloud will be represents a huge shift in the way key to health systems unleashing the providers operate and requires both a power of coordinated care. mind-set and an organizational culture transformation to succeed (more on Putting the strategies the implications of this approach can together be found on the opposite page). Like While these strategies are not mutually all transformational strategies, this exclusive, there are limits to how many approach will take time and significant components can be viably pursued at experimentation to succeed. once. There are a number of dimensions Leveraging Big Data to deliver better, of the strategic choices available. more targeted services Perhaps the most significant are While a few payers and providers questions about the scope of market have toyed with healthcare CRM being served and the extent to which technologies in the past, the evolution the model is reimagined. This informs of data analytics now offers health the strategy map in Figure 5 and it can systems new and powerful tools for be seen that some of the options cover increasing efficiency, enhancing safety more of the territory. and reducing costs. Predictive patient The reality is that there is no silver bullet behavior models, highly-accurate or off-the-shelf solution for providers; demand forecasts or even guidelines each will need to develop their own tailored to individual risk factors would unique approach based on local undoubtedly catalyze significant conditions and the decisions made by change. the different players in the system. It is likely that the greatest Moreover, strategies based on technological catalyst for driving small improvements and growth, more coordinated and effective care, while important, are not going to be however, will be the adoption of sufficient to meet the challenges; cloud technologies. The power of the

Figure 5: Strategy map for providers Model Improve existing Reimagine model

Current Cost Quality as a Lean improvement differentiator

Communities as Focused assets factory Market

Networks Integrated care

Enter new Academic Health markets Science Centers New New channels

Source: KPMG International, 2013. wholesale change will be needed. level of services and scale that is Indeed, many hospitals will need needed. Providers that have grown to change their clinical, operational accustomed to running services Strategies and business models much more in institutions are going to need to fundamentally. This will require develop a range of new skills, take a based on small experiments and investment. different approach to managing risk improvements and ultimately move many of their Small hospitals, in particular, find services out of their buildings and into themselves threatened in this and growth, while the wider community. It seems likely environment and will increasingly that hospitals will need to reimagine important, are find benefits to being part of wider themselves as the core of a health networks both locally (with primary system and start to retrain staff, not going to be and home care) and across wider rethink their business models and areas (working with specialist think about their buildings and other sufficient to meet providers). In many systems, assets in new ways. primary care will also have to change the challenges. radically to be able to provide the

Key take away points for providers

Providers will have to act quickly to meet these challenges. Health system leaders at our summit in Rome were very clear about what needs to change in their organizations in order to fundamentally alter the status quo. • Invest in leadership at all levels – University College London Hospitals has an internal leadership academy targeting the top 400 leaders in the organization. • Rethink internal structures – for example, the Erasmus Medical Center in the Netherlands has moved away from structures based around medical disciplines to ones closer to the needs of patients with multiple conditions. • Develop a focus on value and create new relationships with physicians and patients. Gary Kaplan, CEO of Virginia Mason in Seattle, has developed a new compact between the medical staff and the organization to engage them in helping to drive forward improvement focus of value. • Invest in strategies to get the best out of the workforce – for more on this, see Value walks: Successful habits for improving workforce motivation and productivity, a report by KPMG International.9 • Use measurement, improvement and information to gain strategic advantage. • Build networks – both internally and internationally. • Learn from other markets and industry sectors. • There needs to be a greater focus on outcomes not inputs. Leaders need to empower managers and physicians and give them the freedom to innovate and act in order to deliver quality and best practices.

Prof. Shan Wang, Peking University Peoples Hospital, China, meets Amit Mookim, KPMG in India.

9 Value walks: Successful habits for improving workforce motivation and productivity. KPMG International, 2012.

Leadership and culture KPMG’s Global Healthcare conference featured a number of speakers who focused on the vital importance of leadership. This was not just about their personal contribution as leaders (which was clearly substantial) but rather about the importance of their teams, being humble about what needed to be accomplished, and being passionate about improvement. Indeed, much of the emphasis within organizations tended to fall on the followers (mid-level leaders and front-line staff), and how the leadership team created an effective culture that includes: • a clear set of values; • consistent leadership towards a shared purpose over a long period of time and, in particular, considerable stability and longevity amongst top leaders; • commitment to real and deep engagement from the medical staff; • a strong focus on the front-line, particularly the need to nurture and develop front-line and mid-level leaders. In all systems, this part of the organization was perceived as being both vitally important and underdeveloped; • an expectation that teams and individuals act according to the culture and are prepared to be held accountable for their performance; • the alignment of measures between medical, patient and organizational perspectives; • transparency of information, both internally and externally; and • curiosity about how other high-performing organizations achieve results. This requires health system leaders to get basic operations, internal coordination, and the processes that support clinicians running very smoothly which, in turn, will improve quality and the experience of both patients and staff. But it is also the entry ticket to being taken seriously as a strategic leader. Leaders need It was clear there is a growing complexity facing all systems around to empower the world. These include: regulators that are demanding ever more information; the growing complexity of the patient and the services they managers and need; and the growth of internal and external monitoring systems. physicians and give The best leaders were finding ways to manage and even reduce this complexity by directing staff as much as possible by using outcomes them the freedom (not detailed process targets) while at the same time creating space for them to innovate, experiment and continuously improve. to innovate and act “I believe people should learn how to make more mistakes, take more in order to deliver risks, and risk public humiliation in the service of seeking new solutions and finding creative approaches to solve problems,”saysT im Harford, quality and best author and columnist, the Financial Times. practices.

Patients as partners

The case for change greater influence on their treatment and the quality of service they receive. In Traditionally, patients have been the turn, this has shifted the balance away passive recipients of the care provided from the traditional ‘doctor knows best’ to them. But recently, this has started to relationship and towards one where shift as patient expectations change and patients take a more active role in their payers and providers see the significant treatment plans. potential to use patient power to not only modify and enhance how care is Growing value of shared provided, but also to produce improved decision-making outcomes at lower cost. There are a Evidence shows that, for a range of number of factors catalyzing this change conditions, patients often make better in the industry. (and more cost-effective) decisions about their care when they are fully Changing patient expectations informed about their treatment With the advent of the internet, options. In many cases, patients providers have found that patients, their tend to choose more conservative families and caregivers are increasingly and often lower-cost options than well informed about their treatment those chosen by their physician. The options and care pathways. At the same incentives to get involved in decisions time, consumers’ experience with are even greater in circumstances other service industries means that where patients have a direct financial the services offered by many health stake in the costs of a procedure. providers is increasingly out of line with the client-focused and data-driven According to Professor Al Mulley of Payers and approaches being utilized in other parts the The Dartmouth Institute for Health providers see of the economy. Indeed, patients are Policy & Clinical Practice in the US, there increasingly expecting to interact with is a widespread failure by clinicians to the significant their service providers through a variety properly understand the preferences of channels (such as the web and mobile of their patients and how the proposed potential to use devices) and will expect the same type interventions will affect their lives. He of approach from healthcare. calls this ‘preference misdiagnosis’ and patient power to argues that there is a major problem of Amplified patient voice wasted resources and harm to patients not only modify Along with changing expectations, as a result. patients have also started to and enhance how proactively take control of their health There is also growing concern that care is provided, management. Social media and the there is an increasing amount of ‘over- internet have not only provided valuable diagnosis’ in which patients are over but also to produce access to opinions and information investigated and screened. As a result, regarding personal health issues, but some patients are being treated for improved outcomes have also amplified patient voices and conditions for which the benefits of the at lower cost. allowed individuals to advocate for intervention are – at best – marginal and

Jackie Brown, KPMG in the UK in some cases harmful. The bottom line in high levels of supported self-care. bodies react to particular treatment is that an informed patient that is aware Experience from other industries that options. Interestingly, many providers of the risks may be less likely to agree to have adopted ‘self-service models’ have been rather slow to capitalize on these procedures. shows that self-serve approaches new innovations such as the use of are popular with customers, even social media to connect patients who The need to improve planning though they effectively mean that the share conditions, which enables them for end-of-life care consumer is undertaking a greater to exchange ideas, tips for self-care, and Advance planning and ongoing share of the work load. In many other information. communication with end-of-life cases, consumers enjoy the benefits patients and their caregivers will Opportunities to reduce the costs of gained in convenience and control, improve decision-making and ensure care through changes in behavior as well as the potential for lower the appropriateness of care for patients As payers become more aware of the prices. And, as patients and payers near end of life. And, since the clinical opportunities to improve quality and start to experience mounting costs goal for medical support should be on reduce costs by getting patients more in insurance premiums, deductibles preserving and enhancing quality of involved in their treatment decisions, and co-payments, these approaches life, there is growing consensus that many are also exploring opportunities become much more attractive. efforts need to be made to reduce the to promote more healthy lifestyles, proportion of patients dying in hospital The fact that patients already manage and the use of preventative care. and the amount of expensive, futile and much of their own care means that they And while the economic arguments often harmful care given at the end-of- are often experts in the management for this approach are somewhat less life. Shifting to more appropriate and of their own condition, and are more clear than the ethical ones, all signs less clinically intrusive care settings likely to follow treatment plans and be suggest that the economic evidence should be a priority. motivated in achieving their personal is growing. Regardless, the shift in health outcome goals. In fact, in the case behavior represents both a major Making chronic disease care of rare diseases, many patients have challenge and an opportunity to more effective shown that they have more information payers, providers and patients and will Healthcare systems are increasingly than their primary care physician. They require some significant rethinking of recognizing that many patients with also often know more about how their traditional approaches. chronic diseases are already engaged

Embracing the change that allows information sharing in this way already exists, getting it accepted Ensuring that organizations are well by professionals remains a challenge in positioned to take full advantage of many markets, and there are technical the changes now at work within the and information governance questions system will be no simple matter. Based that will need to be managed. on our experience, we have identified a number of components that must be in Health literacy, decision aids place for providers to capitalize on this and coaching new environment. Many providers are finding that getting patients involved in shared Pathways decision-making requires patients Patients have become key players in to have developed health literacy the care pathway and, as such, need and the support of decision aids to be able to understand the options and coaching (either face-to-face or available to them. There also need to electronically). Already there is ample be mechanisms to ensure that care evidence to show that greater health is consistent. Moreover, any variation literacy helps patients to make better not resulting directly from patient decisions and – in the case of chronic preferences must be eliminated disease – manage their conditions and outcomes must become more more effectively. In fact, studies have predictable. In the ParkinsonNet found that increased health literacy case study on page 36, we see how has a significant impact on reducing pathways can be written in partnership unplanned hospital admissions. with the patient and, critically, in a form that can be used by the patient At the same time, the growing interest themselves. in reducing over-treatment has led to the development of more information However, while pathways need to aimed at helping patients make better provide patients with choice and choices, particularly about tests and discretion about important decisions, procedures where there is strong an individual’s adherence to them and evidence of over-use and limited benefit. their reasons for non-adherence need to In the US, a number of specialist be captured and analyzed. This process medical societies are actively producing can be effectively managed through web guidance tools aimed at helping automation built into the IT systems, inform patients about disease areas and workflow process maps and by better treatment options and, in some cases, defining the roles and responsibilities of these are being used as a routine part For patients clinical and support staff. of care between doctors and patients. The patient record Adjuvantonline is a great example of to become more For patients to become more involved how web guidance is being used in involved in their in their care options, they first need to oncology centers around the world. take ownership of their records and Continuity and access care options, they care plans. And, as approaches become While most patients seem to want rapid more integrated, patients will also need access to high-quality professionals, first need to take to be able to grant varying degrees of a significant proportion, particularly access to their records to health and those with chronic diseases, also want ownership of their other professionals. This is particularly to see the professionals that know important for complex chronic conditions their particular circumstances and records and care where the patient or their caregiver may understand their condition. And while plans. take on some (or all) of the role of care it is possible to create some form of coordination. But while the technology electronic continuity, this can never be

a complete substitute for relationship- at helping patients manage their own proportion of the population may belong based care. This means that either care more effectively and efficiently. to segments that are not very engaged patient expectations will need to be These include devices that support and with their own health, are fatalistic or in renegotiated, or providers will need to facilitate physiological measurement, denial. These vary significantly between undertake substantial reorganization of health status tracking, and access to different countries and cultures, as does the work of clinicians in primary care and advice. Increasingly, these solutions are willingness to challenge professional specialists dealing with chronic diseases. being incorporated into smartphones views. Those providers and payers that or as add-on devices to existing do not properly understand this, may find Social networks equipment already owned by patients. that their approaches fail to get traction As noted in the case study on page 36, As is often the case, the introduction and, as a result, resources will be wasted. patients are increasingly using social of a new technology can often be far networks to connect with their peers In the UK, the Whole System less challenging than the redesign of in other markets, communities and Demonstrator program found that work processes and job roles that are countries. Sometimes, this has been 30 percent of patients did not wish to required to support it. combined with specialist portals that participate, in some cases because it allow the interchange of information A note of caution was felt that the technology would act between patients and their providers. It should be noted that not all patients as a constant reminder of their illness. For payers and providers, the challenge (or their families and other potential In fact, there is still some debate on is in working out how to engage with caregivers) want to take responsibility whether the frequent measurement these networks, particularly in situations for the management of their own care. of physiology actually helps people where the service is provided by a Particularly with the elderly and those manage their health, with some arguing third party and therefore outside of the that are less ‘health literate’, patients may that we run the risk of ‘medicalizing’ payers’ and providers’ control. decide to let a clinician make some of normal variation and turning risks into these choices for them. Technology to support self- diseases, creating unnecessary anxiety. management We also know that there are different Great care and multiple experiments will As technology advances, we are segments of the population that have be required to make sure that some of seeing a range of new technologies very different attitudes to self-care and these mistakes are avoided. emerging that are aimed specifically self-management. Indeed, a sizeable

Prof. Axel Ekkernkamp, CEO, Unfallkrankenhaus, Berlin; Prof. Shan Wang, Peking University Peoples Hospital, China; Mei Dong, KPMG in China.

Case Study

ParkinsonNet is a vision of the future for from ‘God to guide’ by shifting to a The next step was to provide these the management of a complex disease partnership approach with patients specialists with tools that could facilitate and illustrates the power of the patient as to identify the regimen that works greater communication and the sharing a participant in their own care. It is also an best for them. of best practices, new approaches and inspiring example of clinical leadership. data about patient outcomes. 4. Creating a network of experts. The model has been built by Professor With this infrastructure in place, 5. Linking all of these together with Bloem, a consultant neurologist at the Prof. Bloem was finally able to information technology tools. Radboud University Nijmegen Medical enroll patients through a web portal, Centre in the Netherlands. His goal was Based on these assumptions, Prof. thereby allowing patients to choose to create a model that met the needs of Bloem worked directly with patients an accredited provider, confident in the patient while dealing with some of to develop a set of comprehensive the fact that they would be using the the institutional challenges inherent in guidelines including a special same approach as other professionals the system, such as: poor referrals being version geared towards patients’ in the network. Patients are able to made to specialists, over-treatment, use. Interestingly, Prof. Bloem’s set their own priorities and build their under-treatment, the wrong treatments work found that a key part of the own networks of care supported by being used, a lack of specific expertise guidelines involved patients telling electronic tools which also allow them and poor communication between their professionals what they needed to set their own priorities and goals professionals about patient care. His to stop doing rather than what they for their care, exchange information research led him to believe that the should be doing. with professionals, and connect to overall gap between evidence and actual other patients. The same tools are With these guidelines in hand, clinical practice needed to be closed. used to connect the professionals Prof. Bloem then set about identifying to each other. In redesigning his services, he identified all the professionals working with five areas that were key to success: Parkinson’s patients in his region, The results of Prof. Bloem’s work have and then train a selection of these been extremely impressive and show 1. Helping to create an active patient in the most up-to-date approach in that sometimes the best thing leaders able to manage their care and take the management of the condition, can do is give away their power. Patient key decisions. including the provision of physical outcomes and satisfaction have seen 2. Defining what value-based care therapy, symptom control, and so enormous improvements and the initiative would look like from the perspective on. Essentially, this meant that has led to a reduction of hospital visits, a of the patient. Parkinson’s expertise was focused 50 percent reduction in hip fractures and within a smaller number of providers. substantial savings for payers valued at 3. Changing the way that doctors and EUR20 million across the Netherlands. other clinicians work with patients

Delegates include: Dr. Claudio Luiz Lottenberg, Hospital Israelita Albert Einstein, Brazil; Prof. Bastiaan R. Bloem, Radboud University Nijmegen Medical Centre, the Netherlands; and Humberto Salicetti, KPMG in Brazil.

Key take away points for Working with Patients Sometimes the It is perhaps odd that it has taken so long for the patient to be recognized as being central to ideas about how healthcare needs to change. Putting the patient at the best thing leaders center is a slogan that is regularly heard but has often just been rhetoric. This is not can do is give away only misguided but it means that a significant opportunity has often been lost. Shared decision-making, co-designed services, patient self-management and their power. the use of technology to put patients in control of their conditions could be a very significant trend. In the US this has been further reinforced by a provision in the Affordable Care Act which calls for the increased use of shared decision-making. Ultimately, those providers and payers that are able to find new ways to work with their patients to adopt these new approaches will enjoy a significant advantage, strengthen their ability to deliver better care (often with fewer resources) and improve their ethical standing. However, the journey can often be difficult and will require a change in behavior amongst providers, greater education of patients, more integrated technology and a range of new organizational competencies. This relationship between patient, provider and payer will be key. It requires commitment to partnership and trust. There is also a need to invest in communications, relationships and awareness, ensuring everyone understands the issues and has the opportunity to contribute.

Experiments, adaptation and sometimes – failure

One of the most thought-provoking contributions to our adapted and modified to match local circumstances and, conference came from Tim Harford, Senior Columnist in many cases, require experimentation and the testing at the Financial Times. He argued that today’s highly of new ideas. This is a worrying thought, particularly in complex challenges do not lend themselves to top down healthcare and especially in those systems that have a leadership; the world has become far too unpredictable high level of political involvement, as it means that there and complex. Instead, we must adapt – improvise, work will be quite a high level of risk and some failures. But from the bottom up, and take small steps rather than there is no real alternative. great leaps forward. An important role for leaders is to create the A number of the strategies listed here are emerging and environment in which this spirit of innovation and all of them depend on the local context. They need to be experiment can thrive.

Conclusion

Lord Nigel Crisp, Chairman of the All-Party Parliamentary Group on Global Health in the UK Systemic change – making it happen

KPMG’s Something to Teach, Something issues. In coming together as a group, to Learn stands out in two fundamental they found that they all had something to ways. It addresses practitioners rather teach, and something to learn. than policy makers - and it champions The fact, however, remains, that the real and successful developments as majority of health organizations have well as showing how new theories can yet to embark on the highly complex yet be applied in the real world. vital journey of transformation to cope It draws together the collective views with pressures made even more acute and learning from 40 practitioners by the global financial crisis. The drawn from 22 nations who participated Surveys of KPMG member firm in our Global Healthcare summit, and consequences clients reveal that while nearly all the practical knowledge drawn from healthcare leaders accept that the experts from KPMG’s extensive Global of inaction, will way the industry works will change Healthcare Advisory practice. put the future over the next five years – with 65 A new phase is underway, as leading percent predicting major change – only competitiveness organizations and systems are rising a quarter of them are preparing to to meet their challenges by developing overhaul their business models. Many and commercial innovative new models of care built on argue that they will be able to get by evolving relationships between payers, without such a transformation. Put survival of providers and patients and designed to another way: “Yes, major change is organizations at marry cost-effectiveness with quality. undoubtedly coming... but not for me.” They did, however, confirm that The consequences of such inaction, serious risk. Now is the world’s various health systems, this report argues, will put the future regardless of design, funding, or level competitiveness and commercial the time to act. of establishment, all share very similar survival of organizations at serious risk.

A s our conference highlighted, no-one influencing the way patients choose from each other in terms of pooling can avoid addressing the issues. Now is what care they have, thus combating knowledge and experiences over the the time to act. the problems of quality variation and, in building of clinical and business models some cases, over-diagnosis and over- and the development of leadership. As this report highlights, healthcare treatment. payers – be they governments, public It is no coincidence that many of the most sector bodies or insurance companies – From volume to value demanding people in healthcare are also are no longer willing to continue along a the most curious, spending a great deal route that is both unsustainable and also Healthcare providers also need of their time examining what others are failing to deliver the best possible value to change the way they operate. doing. Markets in Asia and in emerging for patients. This means they too must make a nations, in particular, are experimenting fundamental shift from volume to with fresh models and structures that Payers are becoming ‘activists’, seeing value. Where traditional models have are dynamic, flexible and open to further themselves as agents of change where focused on increasing volumes, new change rather than merely copying more once they were more administrative and ones are beginning to focus instead experienced systems. passive in their functions. Increasingly, on outcomes, quality and the need for they are demanding that healthcare integrated, closely-connected services Our summit not only identified key issues providers re-think their models, which directly benefit patients. facing healthcare, such as the rise of the while also incentivizing patients to ‘activist payer’, the challenges facing take a bigger role and to become Similarly, today’s care is increasingly providers and the opportunity to engage active partners with clinicians in the honing in on prevention and patient patients as partners, but it also built on management of their own, personally- self-management at home and in the the discussions of delegates to highlight designed care. community, where once it waited for concrete ways for both payers and people to become ill enough to require providers to meet the challenges ahead. Payers are ensuring that the people complex, expensive hospital care. they are looking after get better value from the system. Approaches range One of the most exciting aspects of from actively working to re-shape the conference – inspiring this report’s the landscape of provision in order to title – was the realization that healthcare safeguard quality, influencing providers systems across the world, despite to come up with more imaginative and their widely differing approaches and innovative care solutions, through to structures, have a great deal to gain

Recommendations for payers

• Payers must make their organization capable of • They must develop new skills and organizational abilities contracting for outcomes and value for the patient in data analytics, outcomes measurement, contracting, rather than simply the volume of cases treated. and care system design. • Much more focus will need to be placed on the • Payers must engage with providers in new ways to management of overall population health. shape their behavior, create innovation and, where necessary, stop contracting them to provide care where • Delivery models need to become more integrated, they fail to comply with quality standards and/or price. which means current payment systems, many of which actually encourage fragmentation, will need to • Providers will need to be incentivized to change in both reform. the medium and longer term. Payers will need to find innovative ways to support them through the transition. • Pushing care upstream has become the clear mission. • Payers must find new ways to connect to patients to influence their behavior.

Isabel Vaz, Espírito Santo Saúde, Portugal

Recommendations for providers

• Providers need to fundamentally reshape their • For many, the logic is to take more responsibility for approach and they must do it quickly. There are a the whole of the patient journey or for the longer- range of options available, but all will require new term health of populations. There is a need to move skills and ways of working. away from providing episodes of care to providing or orchestrating the whole package. As with payers, this • Being operationally excellent remains important but means less focus on volume and much more on value. much more must be achieved. • Investing in leadership will be key, as will the creation • Many providers think they can grow organically as the of new relationships with clinical staff. demand for healthcare grows. Many of them will be wrong. If their current model is not working, simply • Building networks, learning from other markets and making it bigger will not make it work any better nor better use of information to gain strategic advantage solve its fundamental problems. Failing to deal with will come to the fore. this poses a significant risk to their survival. • New approaches will include creating integrated health systems where appropriate, building specialist networks, or focusing on areas of special expertise.

Payers and providers will also need to develop their Doing nothing is not an option information systems and analytics as they seek to make transformational changes to both their own organizations and It is difficult to establish a timeline for action. Each to those around them. Information systems, which will have organization will have its own market and regulatory to be increasingly shared and more accessible in future, must environment to consider. Some will already have taken action, underpin attempts to integrate care as well as support new others will not, so that their next decisions will be heavily ways of interacting with patients. conditioned by their current situation. Finally, high-quality leadership and the engagement of doctors That should not be an excuse for a lack of urgency. Doing and front-line staff will be vital to help individual organizations nothing is the one option that is not on the table. The case to adapt. studies included in this report offer graphic illustrations of how different bodies and market sectors are already grasping the Transformational change is, by definition, never easy – more opportunities for driving through transformational change. experiments are required and with this there are greater risks. Similarly, changes will not bring overnight benefits – Time is of the essence. Just as each organization needs to redesigning care pathways and provision, developing new follow its own path of transformation, so each will face its own contracting and payment methods and introducing new IT will deadlines if it is to remain competitive over the coming years. all take time and can all have relatively long pay-back periods. Health leaders believe the next five years will be crucial. This means that for many there will be difficult transitions and Simply by joining the discussion, many of those leaders are things may get worse before they get better. already taking steps to reflect on their approaches, both from a domestic and international perspective, and monitor how organizations similar to their own are starting to re-evaluate their futures. For everyone has something to teach, and something to learn.

Wouter Bos, KPMG in the Netherlands

Recommendations for both payers and providers

• Payers and providers need to find new ways to work • For many, significant structural change will be together and need to move away from traditional required, yet the payback for such investment will not adversarial and transactional approaches to one be immediate and will take time to be realized. which focuses on population health and outcomes. • Payers and providers must ensure there is a deep • To fully understand the strategic options and understanding of what constitutes value for patients models available, many organizations will have to and build this into every process – including the think deeply about what they do, how they work, development of shared decision-making. who they work with and the fundamental nature • They must use new channels to talk to patients and to of their business. connect them to each other. Shared decision-making, • Leadership at all levels will be an essential patient self-management and the use of technology investment in driving through change. The best to put patients in control of their conditions will be a leaders are already finding ways to manage significant trend. the ever-increasing complexity of healthcare • The best-prepared organizations are investing a by creating the space for staff to innovate, significant amount in both teaching and learning as experiment and continuously improve. they work towards new ways of operating.

Something to teach, Something to learn does not end at We will use our networks, the unrivalled expertise of our the conclusion of this report. Center of Excellence team and our international reach to take the debate around the world and help facilitate the Indeed, harnessing the many experiences and ideas that spread of innovation and good practices. have informed this document is just the start. At the same time, KPMG’s healthcare professionals will Our intention now is to use the important lessons from work hard to explore and develop the tools that will help the global summit to begin a dialogue with healthcare enable health systems to prepare themselves for the leaders, practitioners and influencers across the world. challenges ahead.

Participants We wish to express our sincere thanks to the participants and contributors to this report.

Prof. Dr. Bastiaan Bloem Martin Gerber Medical Director CFO Radboud University Nijmegen Universitätsspital Basel Medical Centre Christian Boel Tim Harford Vice Healthcare President Senior Columnist at the Financial Times and Region Midtjylland author of Adapt: Why Success Always Starts with Failure Prof. Dr. Hans Büller Dr. Pieter Hasekamp CEO CEO Erasmus Medical Center Zorgverzekeraars Nederland

Sir Ian Carruthers Unni Hembre CEO President National Health Service, European Federation of Nurses Associations South of England (EFN) Lord Nigel Crisp Prof. Dr. Udo Janssen Chairman Chairman All-Party Parliamentary German Hospital Institute Group on Global Health Paul Cummings Gary Kaplan Director of Finance CEO Northern Ireland Health and Social Care Board Virginia Mason Medical Center

Frances Diver Sir Bruce Keogh Executive Director Medical Director Victorian Department of Health National Health Service and NHS Commissioning Board Dr. Jennifer Dixon Bala Krishnan Director Director of Development Office of Chairman NuffieldT rust Aspetar ScientificA dvisory Board

Prof. Axel Ekkernkamp Dr. Chul Lee CEO CEO Unfallkrankenhaus, Berlin Yonsei University Health System

Orsida Gjebrea Dr. Claudio Luiz Lottenberg Senior Policy Advisor Chairman & President Supreme Council of Health Hospital Israelita Albert Einstein

Anne McElvoy Paolo Rolleri Public Policy Editor Director General The Economist IRCCS San Raffaele Pisana – Istituto di Ricovero e Cura a Carattere Scientifico Valerie Michie Dr. Giancarlo Ruscitti Global Head of Health CEO SERCO Fondazione “Opera San Camillo”

Dr. Terry McWade Dr. Brian Ruff Deputy CEO Head of Risk Intelligence and Royal College of Surgeons, Ireland Access Innovating Divisions Discovery Health Sir Jonathan Michael Dr. Masami Sakoi CEO Planning Policy Director Oxford University Hospitals Ministry of Health, Labour and Welfare National Health Service (NHS) trust Filippo Monteleone Prof. Anupam Sibal Managing Director Medical Director General de Santé Apollo Hospital

Sir Robert Naylor Dr. Kevin Smith CEO President and CEO University College London Hospitals St. Joseph’s Health System National Health Service (NHS) Foundation Trust Prof. Benjamin Ong Dr. Arthur Southam CEO Executive Vice President National University Health System Kaiser Permanente

Carlo Perucci Isabel Vaz Head of the National Outcomes Programme CEO National Healthcare Agency Espírito Santo Saúde

Glenna Raymond Professor Shan Wang President and CEO CEO Ontario Shores Centre for Mental Health Sciences Peking University Peoples Hospital Chris Rex Ron Williams CEO Former Chair & CEO of Aetna Inc., member of Ramsay Health Care President Obama’s Management Advisory Board

In healthcare, every patient is unique; yet many of the challenges facing their healthcare systems are similar. KPMG practitioners, spanning 150 countries in our global network, help clients see their biggest issues clearly, and deliver solutions that help change the face of health.

Take a closer look at kpmg.com/healthcare

© 2013 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.T he KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved. Something to teach, Something to learn 45

Global Healthcare Thought leadership

We invite you to visit KPMG Global Healthcare (kpmg.com/healthcare) to access our global thought leadership. Here you can gain valuable insights on a range of topics that we hope add to the global dialogue on healthcare. Should you prefer a printed copy of the publication, please email us at [email protected].

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Nigel Edwards, KPMG in the UK Dr. Hilary Thomas, KPMG in the UK Nigel is a major figure in global healthcare, with expertise A leading exponent of care system redesign, Hilary helps join in national healthcare policy planning, design and reform. the different parts of the healthcare community to improve efficiency and quality.

Dr. Sören Eichhorst, KPMG in Germany Roger Widdowson, KPMG in the UK With experience across a range of healthcare sectors, Roger uses his knowledge of both healthcare and what Sören brings together the different stakeholders to makes a successful transaction to ensure that corporate improve both quality and margins. M&A adds shareholder value.

Chairman Czech Republic Luxembourg Singapore Global Health Practice Karla Vorackova Patrick Wies Wah Yeow Tan Mark Britnell T: +420222123500 T: +352 22 51 51 6305 T: +65 641 18338 T: +44 20 7694 2014 E: [email protected] E: [email protected] E: [email protected] E: [email protected] Denmark Malaysia Spain Africa Claus Hammer-Pedersen Yeekeng Lee Candido Perez Serrano Sven Byl T: +45 25 294 721 T: +60 3 7721 3388 T: +34 914 513091 T: +27 11 647 6713 E: [email protected] E: [email protected] E: [email protected] E: [email protected] France Mexico Sweden Angola Benoit Pericard Andrés Aldama Zúñiga Annacari Astner Wimmerstedt Fernando Mascarenhas T: +33 1 55 68 86 66 T: +01 55 5246 8589 T: +46 8 7236120 T: +244 227 280 102 E: [email protected] E: [email protected] E: annacari.astnerwimmerstedt@ E: [email protected] kpmg.se Germany the Netherlands Argentina Volker Penter Wouter Bos Switzerland Mariano Sanchez T: +49 30 2068 4740 T: +31 0 20 656 7428 Michael Herzog T: +5411 4316 5774 E: [email protected] E: [email protected] T: +41 44 249 31 53 E: [email protected] E: [email protected] Hungary New Zealand Australia Andrea Nestor Gareth Jones Taiwan Liz Forsyth T: +36 1 887 7479 T: +64 4 816 4812 Eric K. J. Tsao T: +61 2 9335 8233 E: [email protected] E: [email protected] T: +88 628 101 6666 E: [email protected] E: [email protected] India Norway Austria Amit Mookim Lisbeth Normann Thailand Johann Essl T: +91 22 3090 2141 T: +47 406 39607 Chotpaiboonpun Boonsri T: +43 732 6938 2238 E: [email protected] E: [email protected] T: +66 267 721 13 E: [email protected] E: [email protected] Indonesia the Philippines Brazil Tohana Widjaja Emmanuel P Bonoan UK Humberto Salicetti T: +62 21 574 2333 T: +63 2 885 7000 Andrew Hine T: +55 11 21833006 E: [email protected] E: [email protected] T: +44 121 2323744 E: [email protected] E: [email protected] Ireland Portugal Bulgaria Alan Hughes Fernando Faria US Iva Todorova T: +353 17004169 T: +351210110108 Ed Giniat T: +35 95 269 9650 E: [email protected] E: [email protected] T: +1 312 665 2073 E: [email protected] E: [email protected] Israel Qatar and Bahrain Cambodia Haggit Philo Tim Bentley Vietnam Cong Ai Nguyen T: +972 3 684 8000 T: +974 44576444 Kwang Puay Chong T: +84 83 821 9266 E: [email protected] E: [email protected] T: +84 8 3821 9266 E: [email protected] E: [email protected] Italy Romania Canada Alberto De Negri Maria Elisei Georgina Black T: +39 02 67643606 T: +40 37 237 7800 T: +1 416 777 3032 E: [email protected] E: [email protected] E: [email protected] Japan Russia Central/Eastern Europe Keiichi Ohwari Victoria Samsonova Miroslaw Proppe T: +81 3 5218 6451 T: +74959374444 T: +48 604 496 390 E: [email protected] E: [email protected] E: [email protected] Korea Saudi Arabia China Min Shik (Michael) Cho Sashikanth Ramakrishnan Norbert Meyring T: +82 2 2112 7777 T: +966 1 874 8615 T: +86 (21) 2212 2888 E: [email protected] E: [email protected] E: [email protected]

We wish to acknowledge the special contributions of Marc Berg, KPMG in the Netherlands and Wai Chiong Loke, KPMG in Singapore.

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Designed by Evalueserve. Publication name: Something to teach, something to learn. Publication number: 121635. Publication date: April 2013