SAME DIFFERENCE A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS • U.S. • GERMANY INTRODUCTION...... 01 HEALTHCARE IN ENGLAND, THE U.S. AND GERMANY...... 02 THE CHANGING ENVIRONMENT...... 08 COMMISSIONING RESPONSES...... 13 CASE STUDY: UK...... 15 CHANGING CARE MODELS: PROVIDERS...... 16 CASE STUDY: U.S...... 20 CHANGING CARE MODELS: ...... 22 TECHNOLOGY...... 24 CASE STUDY: GERMANY...... 26 CONCLUSION...... 28 UNDERSTANDING THE TERMS WE USE...... 30 REFERENCES...... 31

PRODUCED BY THE BDO CENTRE FOR GLOBAL HEALTHCARE EXCELLENCE & INNOVATION NOVEMBER 2016 A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS | SAME DIFFERENCE 01

INTRODUCTION A CHANGING LANDSCAPE

Healthcare stories dominate headlines around the world. Recently there has been a focus on increased demand caused by growing and ageing populations, the introduction of new technologies and the need to contain spread of conditions such as obesity and diabetes.

Whether it’s the Affordable Care Act in the U.S., reforms of the English (NHS) or the Structure Act in Germany, healthcare systems are constantly evolving their local responses to address these international problems. Using BDO’s experience working with and advising clients in these countries, this paper provides an insight into factors that are currently impacting on their healthcare systems and how the countries are adapting to meet the common challenges. The paper identifies three key themes which are significantly impacting the design and delivery of healthcare across the three countries:

Although there will always be local CHANGING ENVIRONMENT differences, we think the paper reveals a 01 Significant demographic shifts, financial and political pressures and significant degree of similarity between disruption through new market entrants and technology. the challenges facing England, the U.S. and Germany and the approaches that can be taken to address them. CHANGING PAYER/COMMISSIONER BEHAVIOR We hope the paper will facilitate the transfer 02 A shift in how those who commission and pay for healthcare organise of learning between these nations and to coverage that incentivizes improved quality and safety outcomes. other areas facing similar challenges with their healthcare systems. CHANGING CARE MODELS A trend towards integrated working across acute, community, primary and 03 mental health settings which breaks down traditional silos and promotes place and person-centred care.

STEVE SMURTHWAITE PATRICK PILCH ALEXANDER MORTON PARTNER, MANAGING DIRECTOR, PARTNER, BDO UK BDO USA BDO GERMANY +44 (0)20 7486 5888 +1 212-885-8006 +49 221 97357-158 [email protected] [email protected] [email protected] 02 SAME DIFFERENCE | A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS

HEALTHCARE IN ENGLAND, THE U.S. AND GERMANY

We have chosen to compare ENGLAND CLINICAL COMMISSIONING GROUPS healthcare systems in England, the The National Health Service is the public Clinical Commissioning Groups (CCGs) U.S. and Germany because they have healthcare system in the . purchase medical treatment and related broadly similar cultural, political One of the key pillars of the welfare state, it services from healthcare providers, including was introduced in 1948. but not limited to: and economic systems. However • Urgent and emergency care they operate completely different Funded largely through taxation, medical treatment in the NHS is free at the point of • Elective hospital care funding and delivery processes for delivery for patients who are UK citizens and • Rehabilitation care their healthcare commissioning and those 'ordinarily resident' in England, which • Community health services provision and there may be benefits includes citizens of the European Economic Area (EEA). • Mental health and learning disability from understanding the approaches services. being developed in each country in There are limited exceptions where patients may be charged for pharmacy prescriptions, CCGs were established under the UK’s Health dealing with the challenges they face. dental treatment and certain non-routine and Social Care Act 2012 to assume the role blood tests. of primary payer/commissioner for health services. CCGs are clinically led groups that Approximately 15% of healthcare spend in include all of the General Practices (GPs) in the UK is by insurers and private consumers. their geographical area. The aim of this is to Two-thirds is private medical consumption give GPs and other clinicians the power to eg pharmacy, and the rest is private medical influence commissioning decisions about local 1 insurance. services for their patients. There are 209 CCGs Health policy in England is directed by the covering the whole of England. Secretary of State for Health, an elected CCGs receive their share of national funds for Member of Parliament, and implemented by purchasing healthcare from the DH based on a the Department of Health (DH). formula which includes population, morbidity Readers should note that only the NHS and economic indicators. in England is under direct purview of the national government. The NHS in Scotland, PRIMARY CARE Wales and Northern Ireland are accountable Primary care is most people’s first point of to their own governments and have slightly interaction with health services, and accounts different systems. This paper will focus on for 90% of patient interaction.2 The term is England. Where possible it will use data from often used interchangeably with GP Practices, England, however there are cases where this is however it also includes dental practices, unavailable and so the UK figure has been used. community pharmacies and optometrists with retail outlets. A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS | SAME DIFFERENCE 03

Initially primary care was commissioned by local health economy to deliver a range U.S. NHS England but increasingly this is being of community based services including While both England’s and Germany’s undertaken by CCGs, with some specialist district nursing, community clinics and healthcare systems are largely publicly services continuing to be commissioned rehabilitation funded, the U.S. healthcare system is centrally. • 10 ambulance trusts (including 5 NHS supported through private insurance and FTs) – Ambulance trusts deliver urgent government insurance programmes as well as TRUSTS and planned healthcare and transport people paying for services 'out-of-pocket'. and other healthcare providers in services to patients, taking an average 17.1 Total private health expenditures in the U.S. England are mainly managed by NHS Trusts emergency calls per minute in 2014/2015. represented approximately 33% of total or NHS Foundation Trusts (FTs). These Trusts There is also a relatively small private sector healthcare spend in 2014. Most Americans provide a wide spectrum of care, including delivering diagnostics, elective care and access private through their acute, community, mental health and rehabilitation. employers as well as through state sponsored ambulance services. health exchanges. The federal government All NHS Trusts and NHS FTs are publicly SOCIAL CARE remains the largest payer for services for the owned and managed. Foundation Trusts differ The majority of social care is currently provision of care under the Medicare and from other Trusts in that they are independent commissioned by municipal councils which Medicaid program, which covers almost 25% 4 legal entities and have unique governance are not part of the NHS. Councils may also of Americans. arrangements, enabling greater decision provide social care themselves our outsource Medicaid is a federal and state programme making over finances. However, regulators services to the private sector. administered through the Centers for Medicare may remove these ‘freedoms’ if their financial and Medicaid Services (CMS) and provides or quality performance is assessed as publicly funded healthcare coverage to low- ‘inadequate’.3 income individuals that financially qualify. At time of writing, there are: Medicaid is jointly funded by the federal and • 154 acute non-specialist trusts (including state governments and administered by state 101 NHS FTs) - Hospitals employ a governments. Medicaid provides payment significant part of the NHS workforce, with for medical and behavioral from some providing regional and specialist primary care to long-term medical coverage services and custodial care costs. • 56 mental health trusts (including 43 NHS Medicare is a federally funded and FTs) - Mental health trusts provide health administered programme also administered by and social care services for people with CMS and provides publicly funded healthcare mental health problems, delivering care in coverage to individuals over the age of 65 primary, community and acute settings • 35 community providers (11 NHS trusts, 6 NHS FTs and 18 social enterprises) – Community providers work across the 04 SAME DIFFERENCE | A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS

HEALTHCARE IN ENGLAND, THE U.S. AND GERMANY

as well as coverage to individuals under the healthcare services to the public, while other not-for-profit and for-profit Home Health age of 65 with certain disabilities and all hospitals provide specialist services including Agencies, SNFs, Rehabilitation Facilities, and individuals with End-Stage Renal Disease. obstetrics, gynecology, rehabilitation and Long-Term Care Hospitals. SNFs provide Medicare is provided in four parts, with each orthopaedic services among others. short-term skilled nursing care as well as part providing coverage for specific services rehabilitation services, including physical, including: PRIMARY CARE occupational and speech therapy. Home Health Agencies are the second most widely • Medicare Part A: Hospital Insurance, which Outside of the hospital setting, primary care used PAC and primarily provide skilled nursing covers inpatient hospital stays as well as represents the most common care setting and therapeutic services in the home setting. care in Skilled Nursing Facilities (SNFs), in the U.S. for patients to receive services. hospice and some home healthcare. Primary care represents more than half of ACCOUNTABLE CARE ORGANIZATIONS • Medicare Part B: Medical Insurance, total patient visits but represents only a small (ACOS) which covers doctors’ services including portion of the total U.S. healthcare spend. outpatient care, medical supplies and Primary Care Providers (PCPs) include Family ACOs are care models typically organized preventative services. Physicians, Internists, Pediatricians, and Nurse by a group of providers. Under this model, • Medicare Part C: Medicare Advantage Practitioners and are typically the first line organizations are charged with providing care Plans, a health plan offered by a private of contact a patient has with the healthcare to a group of patients in which quality metrics company contracting with Medicare to system. Primary care can be accessed through and reduced spending are tied to payment provide Medicare Part A and Part B benefits both not-for-profit and for-profit practices, for services. ACOs adopt alternative forms of including prescription drug coverage and hospitals and community health centres. payments than the traditional fee-for-service coverage for most healthcare services. model, are held accountable for the quality PATIENT-CENTERED MEDICAL HOMES of care delivered to patients, and can differ • Medicare Part D: Prescription Drug (PCMH) in design based on the type of healthcare Coverage, provides prescription drug programme being provided. coverage to Medicare plans and is offered Building upon the provision of primary care through private insurance companies services, the PCMH is an innovative care BEHAVIORAL HEALTH approved by Medicare. delivery model coordinating patient care through an existing PCP to ensure that a Behavioral health encompasses mental health HOSPITALS patient is accessing care when appropriate and and substance abuse treatment. Behavioral when needed. The PCMH offers patient-centric health providers treat mental health issues Hospitals have traditionally been at the center services connecting patients to clinicians and and disorders, eating disorders, and substance of driving change as well as providing care to assisting them in navigating the healthcare abuse and addiction. A significant portion of the U.S. population. In fact, the U.S. hospital system and addressing their care needs. providers are not-for-profit community health industry is worth $883 billion, comprising centres while others include acute inpatient 5,627 registered hospitals.5 The U.S. healthcare POST-ACUTE CARE (PACS) facilities and residential treatment facilities. system has a number of different types of Outpatient/community-based care and hospitals ranging from non-governmental Following discharge from the hospital, schools provide screenings and assessments, not-for-profit, state and local government, patients are often transitioned to PACs medication management and therapy for federal government, religious and for-profit to ensure that they are receiving proper patients with a mental health or substance run hospitals. Community hospitals can serve treatment and care including adequate time abuse diagnosis. as academic medical centres or teaching to heal and transition back into a home or hospitals providing ambulatory and general community-based setting. PACs include both A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS | SAME DIFFERENCE 05

GERMANY Germany has one of the world’s oldest rates for all members. The Sickness Funds competition between Sickness Funds is national social health insurance systems with are financed by joint employer-employee currently incentivized by co-payments and origins dating back to Otto von Bismarck’s contributions, amounting to 14.6% of gross out-of-pocket payments for certain specialised social legislation in the 1880s. salary. Thus SHI-insured employees pay a healthcare treatments. health insurance contribution based on their Health insurance is compulsory for the whole Another main characteristic of the German salary whereas private insurers charge risk- population in Germany and consists of two healthcare system is the principle of related contributions. Only the population major types: subsidiarity. Although legislation is passed with a yearly income above the income by the central Ministry of Health and • Statutory health insurance (SHI) - threshold and civil servants can opt for private 6 the healthcare system is regulated by Contributes to 86% of healthcare spend. health insurance. the Federal Joint Committee in Berlin, all • Private Health Insurance - Covers the The SHI System is characterized by the major representatives have the mandate remaining 14% of healthcare expenditure.6 solidarity principle: insured persons receive to negotiate and organise (inpatient and Salaried workers and employees below a the benefits from statutory health insurance outpatient) healthcare delivery on a central certain income threshold can choose one of which are medically necessary, regardless of and federal state level. currently around 130 public not-for-profit SHI income or of the amount of premiums paid companies (“Sickness Funds“) at common and despite their morbidity risks. Increasing

There is large variation in spend per head of population and as a proportion of GDP:

ENGLAND7 GERMANY7 U.S.7 9.8% 11.1% 17.5%7A

SPEND SPEND SPEND AS % OF AS % OF AS % OF GDP GDP GDP

£2,811.80 £3,391 £5,596 SPEND PER CAPITA SPEND PER CAPITA SPEND PER CAPITA (€4,130.50) ($9,451.30)

However all three countries are facing financial pressures caused by the demographic changes, costs of new technology and above average inflation for health services to which their governments are having to respond. These issues are explored in more detail in the following pages. 06 SAME DIFFERENCE | A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS

HEALTHCARE IN ENGLAND, THE U.S. AND GERMANY

These representatives are as follows: Hospitals have to register for the federal • (Central and federal state) Association of state administered 'hospital plans' to receive Hospitals funds from the states and budgets from the • (Central and federal state) Association of Sickness Funds. The 'hospital plans' are set up Physicians on a federal state level based on the current and prospective demographic situation and • (Central and federal state) Association of morbidity of the state population. In fact, every Dentists hospital receives an individual order regarding • (Central and federal state) Association of their individual healthcare delivery components Sickness Funds (basically the amount of beds per medical area) • Association of patient representatives and then negotiates its budget with the local (Officially on a central and also federal Sickness Funds. Hospitals are compensated state level since 2004). by lump-sum payments (German Diagnosis The pharmaceutical and medical technology Related Groups (G-DRG)). From 2017, German industry are not officially involved in hospitals will also be financially rewarded or organizing healthcare delivery and negotiating penalized based on the quality of care provision. contracts but have strong influence, lobbying A list of quality indicators (outcome, process parties on all regional levels. and structure) is being developed by the Federal Joint Committee in Berlin. The German healthcare system is, due to the above mentioned associations and structures, OUTPATIENT SECTOR still characterized by strong silos between outpatient and inpatient care, between In Germany there are 148,000 physicians healthcare providers and payers and between (of a total of 365,000 physicians) working healthcare and social care. There are current in a doctor´s office in an outpatient setting legislative initiatives which, if enacted, will (without dentists). These physicians are transform healthcare delivery in Germany to a mostly specialised doctors. Only 49,000 more patient-oriented and integrated system. physicians in the outpatient sector are General Practitioners (GPs). Doctors’ offices contribute HOSPITALS to 15% of all healthcare expenditures, in total € 50 billion. Physicians need to register with There are 1,956 hospitals8 in Germany the federal state Association of Physicians who accounting for €85 billion healthcare assigns the budget to the doctor´s office. The expenditures (26% of all healthcare budgets themselves are negotiated between expenditure). 30% of these hospitals are the Association of Physicians and the Sickness public, managed by local governments and Funds. The doctor´s budget is set up as a pay- municipalities. 35% are private not-for-profit for-service model but is capped to a certain (owned by churches and private foundations) amount for SHI insured patients. and 35% are private for-profit organizations (mostly hospital chains listed on the stock exchange). A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS | SAME DIFFERENCE 07 08 SAME DIFFERENCE | A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS

THE CHANGING ENVIRONMENT RISING POPULATION, AGE AND DEMAND

Healthcare systems across the DEMOGRAPHICS western world are undergoing All three countries face material demographic changes. England and the U.S. expect increases significant change. Policymakers and in total population while Germany is projecting a slight decrease. Life expectancy is similar health professionals are questioning and growing. Each country is forecasting people aged 80+ to grow at the highest rate to 2030, resulting in a rise in each country’s median age. Providing care for this population segment is unsustainable siloed care delivery more expensive and policy makers predict will lead to increased strain on the current healthcare and, with more money unlikely, systems, unless there is a significant transformation in the design and delivery of services. changing the way healthcare is delivered is critical. We’ve identified PEOPLE AGED 80+ AS A % OF TOTAL POPULATION BY 20309 the key challenges presented by the changing environment in England, the 15 U.S. and Germany. 10

5

% OF TOTAL POPULATION 0 2015 2030

GERMANY UK U.S.

LIFE EXPECTANCY10

85

81 81 80 78 78 79 77 75 74 74

71 73 70 70 69 % OF TOTAL POPULATION 65 1960 1980 2000 2014

GERMANY UK U.S. A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS | SAME DIFFERENCE 09

HEALTHCARE UTILISATION These population changes are impacting on demand for healthcare services and are likely to continue to do so for the foreseeable future. In England, Accident & Emergency (A&E) had 22 MENTAL HEALTH million visits in 2014/2015, with approximately 3,500 more visits every day than five years ago. Approximately 26%of adult Americans14, There is evidence that increased demand has led to falling quality and missed performance 25% English15 and 32% Germans16 are targets such as longer waiting times to see a clinician in A&E departments. Waiting times for estimated to suffer from a diagnosable admission for planned inpatient procedures are also getting longer. mental disorder. With an estimated global In Germany, long-term care and disparities between urban and rural settings will be on-going disease burden of £1.6 trillion17, mental issues. Between 1999 and 2013, those requiring long-term care rose from 2 million to 2.6 million health is becoming the single largest and are forecast to reach 4.7 million by 2060. As evident from the table below, Germany is facing health burden. a population decline by 2030, and an increase in the proportion of elderly people.

POPULATION FIGURES IN 000s11, 12

2015 TOTAL POPULATION 2030 TOTAL POPULATION 2015 TOTAL 60+ POPULATION 2030 TOTAL 60+ POPULATION

54,780 60,524 12,611 16,879 321,774 355,765 66,545 92,606 80,689 79,294 22,269 28,644 UK U.S. GERMANY

Figures are predicated on UK remaining in the EU. As Brexit and the question of the freedom of movement of people have not been resolved, these figures assume Britain remaining a part of the EEA. Should Britain leave the EU, this number may decrease slightly.13 10 SAME DIFFERENCE | A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS

THE CHANGING ENVIRONMENT RISING POPULATION, AGE AND DEMAND

ENGLAND U.S. GERMANY One in three deaths in England are before In the U.S., approximately 117 million people Like in England, one in three deaths are before the age of 75 and more than three quarters have one or more chronic health conditions the age of 75 (279,000). 39% of these die of of these premature deaths are as a result with one in four adults having two or more cancer. of the five big killers: cancer, heart disease, chronic health conditions. Seven of the top 10 Approximately 200,000 deaths per year (75% stroke, respiratory disease and liver disease. causes of death in 2010 were chronic diseases, of the deaths under age 75) are attributed to Approximately 150,00018 deaths per year are and two of these—heart disease and cancer— the five main causes: related to these diseases. accounted for nearly 46% of all deaths. Approximately 62% of all deaths (1,622,304) are related to the 5 main causes of death:

CARDIOVASCULAR CARDIOVASCULAR CARDIOVASCULAR (HEART DISEASE / STROKE) (HEART DISEASE / STROKE) (HEART DISEASE / STROKE)

RESPIRATORY RESPIRATORY RESPIRATORY

OTHER OTHER OTHER CANCER CANCER CANCER LIVER DISEASE LIVER DISEASE

Overall chronic cardiovascular diseases are the most frequent cause of death among men and women (39%, 338,000) and the number of people living with cardiovascular diseases remain unchanged despite the high amount of work in prevention.20 A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS | SAME DIFFERENCE 11

THE CHANGING ENVIRONMENT ECONOMIC CHALLENGES AND POLICY RESPONSES

ECONOMIC CHALLENGES

ENGLAND U.S. GERMANY In England the NHS has a total budget of As a result of the 2010 Patient Protection Germany had total budget of £266.78bn £117.31bn21 in 2015/2016 but the majority of and Affordable Care Act (ACA), healthcare (€315bn) in 2013.23 Trusts are forecasting deficits or significantly spending has increased, primarily due to Expenditure per insured is set to increase by reduced surpluses. The NHS estimates a increased care coverage for Medicaid and 1.9% per annum until 2040. Costs are rising funding gap of £30bn per annum by 2020. private health insurance. In 2013/2014, there faster than corresponding contributions, so The Government has committed to a was a 5.3% increase in healthcare spending the SHI system is expected to experience a further £8bn funding by 2020/2021 with totalling £1.76 trillion ($3 trillion)22. funding gap. the remaining £22bn to be released through efficiencies and new models of care.

POLICY RESPONSES As a result of increased financial pressure, the some areas will drive decentralization of The ACA, also referred to as Obamacare, is way in which healthcare services are delivered decision-making to cities and regions and a federal statute enacted by Congress and is being challenged. Political drivers have significantly impact health and social care signed into law by President Barack Obama impacted healthcare delivery and all three planning. Devolved regions and cities will be on March 23, 2010 and represents the most countries are working within the context of given greater autonomy to define healthcare significant regulatory change to the U.S. significant policy shifts. strategy and allocate financial resources healthcare system since 1965, which saw the based on local needs. For example, in the introduction of Medicare and Medicaid. In England, the Health and Social Care Act Greater Manchester area, the devolution 2012 has paved the way for private funding A primary goal of the ACA, as the name package integrates 38 health and social and 'marketization' of healthcare services suggests, is to increase the affordability of care organizations to create a unified public with commercial contracting to supplement health insurance and reduce total costs of health system and develop new care models public provision. Further, the NHS ‘5-Year providing healthcare through the expansion spanning the health economy. Forward View‘ promotes new models of care of insurance coverage, ultimately lowering involving integration of providers to cover whole In addition, 44 Sustainability and uninsured rates in the U.S. Under the ACA, pathways in all settings from prevention through Transformation Plans (STPs) covering the whole insurance exchanges were introduced to treatment, rehabilitation, reablement and of England are being prepared to establish the healthcare marketplace to facilitate discharge. These are being piloted with funding system-wide strategies for bridging the forecast purchasing of healthcare coverage as well as provided by the ‘Vanguard’ programme which financial, care and quality challenges. mandates that require insurers to accept all will disseminate learning throughout the system. applicants, which also included expanding Similarly in the U.S., the passing of the Patient coverage for applicants with pre-existing To provide more comprehensive and effective Protection and Affordable Care Act (ACA) was conditions, expanding Medicaid eligibility and care options, England is also taking steps to to address rising costs, an ageing population requiring most employers to offer healthcare integrate healthcare with social care, which is and increasing patient acuity. This has led to coverage as an employment benefit. commissioned by local authorities or Councils. redesign of the healthcare delivery system by making providers more accountable for The ACA has also led to the redesign of Further, the devolution of political power improving health and clinical outcomes for a the U.S. healthcare delivery system in away from London-based politicians in defined population. which healthcare providers are being held 12 SAME DIFFERENCE | A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS

THE CHANGING ENVIRONMENT ECONOMIC CHALLENGES AND POLICY RESPONSES

accountable for improving clinical outcomes The primary goal of the KHSG is to Quality Commission has prioritized quality and reducing healthcare spend. As a result, redesign healthcare delivery and structures. improvement across organizations using an healthcare providers are being encouraged Accompanying this law, there are two funds that inspection process, while NHS Improvement is to fundamentally rethink how healthcare are supposed to facilitate this structural changes: working to ensure financial sustainability using is delivered and are thus transforming their • Structure Fund (€1 billion budget) – a risk assessment process and intervention practices on a clinical, operational, financial, Assigned to projects that simply guarantee where needed. and technical level with the goals of driving hospital closing or reductions in the In the U.S., healthcare providers across all care down healthcare costs, enhancing the patient portfolio of the hospital settings are now being required to rethink experience and ultimately improving health • Innovation Fund (€1.2 billion budget) – For delivery of clinical care, protocols and best outcomes for the U.S. population. projects that focus on integrated, patient- practices as a reaction to new regulatory In Germany, laws such as the 2015 Hospital oriented healthcare models and e-Health pressures that measure performance and Structure Act (KHSG) are transforming solutions. These projects can be either ultimately determine payment based on healthcare into a more patient-oriented and related to special patient/disease groups operational outcomes and quality measures. integrated system. Budgets are being capped or to certain (healthcare) regions. Like in Germany’s clinical quality measures are so that hospitals treating more patients will England, it is expected that this will drive governed by law. These measures are not benefit financially. Furthermore, hospitals decentralization of decision-making to established and maintained by the G-BA or delivering poor quality care will be financially cities and regions. Federal Joint Committee. The Medical Service penalized or even excluded from the federal of the Health Funds routinely checks quality state's hospital plan. It is expected that this REGULATORY RESPONSES measures and reported deficiencies are will put all German hospitals under very high Across all three countries there is increasing sanctioned by payment reductions. pressure, not just the smaller rural hospitals regulatory attention on quality and but also the bigger urban facilities. See also our separate section on technology financial sustainability. In England, the Care on p24. A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS | SAME DIFFERENCE 13

COMMISSIONING RESPONSES SHIFTING TO VALUE AND OUTCOMES

VALUE-DRIVEN COMMISSIONING that focuses on achieving better outcomes such as time spent at home, and developed for patients, providers have the opportunity integrated care pathways in order to achieve As a result of rising healthcare spend and to treat people in the most cost-effective them. This included initiatives such as multi- demand in both England and the U.S, new manner without losing revenue. Further, disciplinary teams, social workers in primary payment models are being developed to under the payment system, providers have care and case management that encouraged incentivise providers to improve quality through the opportunity to save money by working preventative and community based care. a patient-centred approach while also lowering together to prevent duplication, ultimately care costs. Outcome or value-based contracts lowering the cost of care. U.S. APPROACH TO VALUE-BASED represent a shift away from paying for acute CONTRACTING hospital activity under traditional fee-for- ONE POSSIBLE SCENARIO - VALUE-DRIVEN service models, which incentivized increased Traditionally, the U.S. has had a fragmented DIABETES CARE activity by providers – whether or not this was funding system that separately pays providers better for patients and the most cost-effective One example of how value-driven through a fee-for-service model which approach for commissioners. commissioning might make an impact is rewarded high healthcare utilisation. However, to consider diabetes treatment services. To with the introduction of healthcare reform The new systems require all providers reduce the need for costly in-patient stays under the ACA, payment models for the contributing to a patient’s care to work and life changing procedures, sufferers could delivery of healthcare services across providers together under a single contract, in an receive regular check-ups in the community. are transitioning to models that reward integrated way, and demonstrate that care They would have their details and history improved collaboration, health outcomes and meets a tangible set of quality, clinical and recorded just once and would be given reduced spending. patient outcome measures. complete, consistent advice on how to Value-based contracting rewards superior By shifting away from a payment regime manage their condition. The key benefits clinical performance but also financially based on the volume of inputs (e.g. number of under this system would be improving patient penalizes providers for poor performance hospital stays and the length of stay) to one experience of care, bettering their health metrics. Quality rating systems, benchmarks outcomes and reducing costs for providers and key performance indicators are being and commissioners at the same time. As the embedded into payment schedules. For providers’ income remains the same, they example, CMS has deployed an array of would have the incentive to provide more care voluntary and mandatory payment innovation on this basis as they retain the savings. models to accelerate the transition to accountable payment models. CMS payment EXAMPLE OF MAXIMIZING VALUE – goals include 50% of Medicare reimbursement CAMDEN CCG payments being tied to alternative payment BDO supported Camden Clinical models as well as a goal to transition 90% Commissioning Group (CCG) in London who of payments linked to quality or value-based worked with patients, providers, the local arrangements by 2018. BDO USA is currently authority and third sector organizations to working with a Performing Provider System develop an Integrated Practice Unit (IPU) for or integrated delivery system as part of New the frail and elderly population. The IPU is York State’s Medicaid Delivery System Reform a patient-centred integrated service model Incentive Payment Program to develop a designed around improving outcomes. The CCG value-based contracting strategy to meet and providers worked with patients to identify these requirements. For further information, the outcomes that mattered most to them, please see the case study on p20. 14 SAME DIFFERENCE | A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS

COMMISSIONING RESPONSES SHIFTING TO VALUE AND OUTCOMES

GERMANY – CONTRACTING FOR QUALITY sharing of electronic health records, medical (MHPAEA) has required health plans to claims data and integrated care pathways, cover mental health services. Additionally, The German payment system is largely health systems will develop targeted strategies through the ACA, mental health benefits are service-based through integrated care to improve healthcare delivery. deemed as being 'essential' and mandates that contracts between SHIs, hospitals, employer sponsored plans, Medicaid managed practitioners, pharmacies and medical device PRIVATE EQUITY TO THE RESCUE? care programs and group health plans provide companies. coverage for mental health services. The The U.S. and Europe have also experienced To address inefficient structures and processes legislation has had a significant impact, with a rise in private equity funding to support the KHSG requires hospitals to take part in mental health services emerging as one of the healthcare sector ventures. In the U.S., comprehensive quality practices. Under the fastest growing sectors in the U.S. healthcare numerous healthcare information technology KHSG, hospitals are evaluated on quality industry. start-up companies are developing innovative measures and are either financially penalized solutions to support healthcare transformation Similar to the U.S., Germany introduced or rewarded based on quality rates. with a focus on population health. These legislation to expand funding for mental Integrated care contracts, enabled through companies are primarily funded through private health services. In 2012, the 'PEPP' system was shared data and risk stratification, are equity investments, private health plans and introduced by the PsychEntgG to establish increasing. Through sharing of electronic health commercial deals. In fact, venture deal volume funding through the evaluation of disease records, medical claims data and integrated for digital health companies exceeded $4 billion severity. This type of funding model, linked to care pathways, health systems develop in 2014 which is nearly equal to combined performance and transparency, has a number targeted strategies to improve care delivery. funding over the prior three years. With funding of challenges to overcome, including: to back development of healthcare technology The German payment system is currently still • Discharging patients at the right time and innovative solutions to improve healthcare, organized by outpatient, inpatient and other • Maintaining accurate records of planning the role of private equity is likely to increase silos. Although financial pressure from capped and delivery as transformation continues to evolve. Our budgets and DRG-lump sum payments have Technology section has more information • Supporting treatment across sectors been in the system for years, there was no about healthcare start-ups and technology. • Putting the patient’s interests first. incentive to work together. The KHSG and the health planning reforms address these The German government and mental health MENTAL HEALTH inefficient structures and processes. Assuming providers are refining the funding mechanisms that higher patient volumes correlate Increased focus on addressing care gaps in the to ensure these challenges can be overcome. with better quality, we will see intensified provision of mental health services has led to NHS England has also expanded funding for interaction between all hospitals and the a change in how these services are funded. mental health services with an additional outpatient sector. Historically, mental health and substance investment of £1 billion to address increased Integrated care contracts between SHIs, abuse services were largely funded by the U.S. demand. As more people use mental health hospitals, practitioners, pharmacies and medical government or by out-of-pocket payments by services, work is being done to improve device companies - enabled through shared data private individuals. In response, The Mental data capture to manage patient care more and risk stratification - will increase. Through Health Parity and Addiction Equity Act 2008 effectively. A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS | SAME DIFFERENCE 15

CASE STUDY STOCKPORT WHOLE SYSTEM TRANSFORMATION – BDO UK

BDO was engaged by partners in the Stockport Health Economy (Stockport Metropolitan Borough Council, Stockport CCG, Stockport NHS Foundation Trust and Pennine Healthcare NHS Foundation Trust) to support transformation of the health and social care system.

Stockport, with a population of 286,000, is with already high levels of unplanned care,25 framework to provide transparent and shared on the southern perimeter of Manchester. Stockport has to manage these demographic ownership of the impact, and organizational The health economy has a higher-than- pressures whilst providing high quality care. forms that were best placed to enable change. average segment of people aged 65+24, and BDO supported our partners to develop Our engagement with the Stockport Health deprivation levels above the national average. a whole system and five-year strategy to Economy consisted of six key phases, working It’s 65+ and 80+ populations will increase address challenges, develop a financial closely with commissioners and providers: 10% and 24% respectively by 2020, and

01 02 03 04 05 06 MODELLING THE DESIGNING CLINICAL DEVELOPING ADVISING ON ADVISING ON ALIGNING VALUES IMPACT AND CASE AND SERVICE THE BUSINESS CONTRACTOR PROVIDER FORM FOR CHANGE MODELS JUSTIFICATION MODELS

We supported leaders We quantified baseline BDO led the design and We provided financial BDO advised on BDO also advised on through working activity, performance delivery of workshops governance to each various options for opportunities and sessions and one- and financial positions across service areas individual programme commissioning and challenges associated on-one coaching of the partners, and co- to build engagement to ensure robust contracting for a system with different provider to collaborate and designed a stakeholder and gain a shared identification and model of care, thereby forms, ultimately facilitate workshops to engagement understanding of drivers verification of financial optimizing outcomes supporting the health identify system-wide programme to for change. We used our status, advising on and efficiency. economy to achieve issues and agree on understand needs. design methodology development of Throughout the Vanguard status. We a unified approach. We carried out a to develop service compliant business process, BDO provided facilitated dialogue We co-designed joint current state analysis blueprints and business justification cases. leadership in outcomes and relationships governance structures of Stockport Health cases and developed BDO created a 5 Year based healthcare between providers, and across the organizations Economy’s health detailed designs to meet ‘Blueprint’ for the and commissioning supported development and identified a and wellbeing, the needs identified whole economy, which models, and provided of key protocols balanced scorecard to benchmarking findings in modelled plans. We included modelled on-going support to the around governance manage transformation, against best practice. delivered and designed activity and financial Board, commissioners arrangements, risk- ultimately enabling BDO modelled forecast large scale ‘consensus’ impacts of overall and providers during sharing agreements, the leaders of each activity and financial events with stakeholder strategy. We provided development of the and the memorandum organization to sign a projections identifying participation to check, financial analysis to 2016/2017 service of understanding. We shared vision statement. a £120 million gap. A challenge, and confirm support Stockport’s contract to reflect provided leadership data tool was created design. BDO developed successful bid to strategic direction. This development and to model the impact detailed models of care become a Vanguard site. led to the introduction supported culture of transformation on which informed the of a block contract for change to increase outcomes, activity overarching system A&E, outpatient and organizational resilience and income flows, and model of care and non-elective admissions in the face of transition. co-produced quantified business case. The and development of a health, wellbeing, and model of care formed £200 million Section financial benefits plans. the basis for the value 75 pooled budget proposition submitted agreement between the centrally for next phase Council and the CCG. funding. 16 SAME DIFFERENCE | A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS

CHANGING CARE MODELS: PROVIDERS ACUTE HEALTH RECONFIGURATION

THE CURRENT MODELS ARE HOSPITALS AND THE ACUTE SECTOR UNSUSTAINABLE Hospitals are seen as a key indicator of the quality of healthcare provision in a country. As Financial pressures and the imperative to demonstrated below, they also provide large volumes of care for patients across the three countries: improve outcomes are driving providers to reconsider how health services are delivered. AVERAGE ED/A&E WAIT TIME The traditional siloed approach to delivering care is not sustainable and does not enable GERMANY ENGLAND U.S. patient-centric care. Across the three 30 TO 45 MINUTES FROM 87.51% SPENDING LESS THAN 135 MINUTES countries, similar changes are occurring. At a TRIAGE TO FIRST PHYSICIAN 4 HOURS IN A&E26 UNTIL SENT HOME30 functional level, a number of CCGs in England CONSULTATION have organized multidisciplinary teams (MDTs) NO. INPATIENT embedded in GP practices to offer a way for NUMBER OF ED/A&E VISITS AVERAGE LENGTH OF STAY DISCHARGES PER 100,000 GPs, nurses, social workers and secondary care clinicians to coordinate care for patients with 26 complex needs, similar to clinical networks 29 33 27 in Germany. Alongside local changes, whole 30 20.0 m 34 health economies in England, the U.S. and 22.4m 31

Germany are radically transforming how 4.8 days 7.4 days 7.4 healthcare is delivered. days 7.0 11,396 12,897 32 28 136.3m 25,224

Despite this high demand, hospitals are required to provide a smooth and efficient service for patients. All three countries have targets to provide quick assessment, as well as ensuring patients can return home as soon as possible. This is particularly challenging for the NHS due to resource capacity issues, evidenced by its recent failures to meet the 95% target for seeing patients within four hours of arrival at A&E. It is also interesting to note from the above table that the average ‘length of stay’ figures for the U.S. are significantly lower than in the England and Germany, which is largely due to the high cost for hospital stays in the U.S. (on average $18,000 per patient) as well as relatively fewer hospital beds per population size.35 A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS | SAME DIFFERENCE 17

FOCUS ON SYSTEM CHANGE, HOSPITAL CONSOLIDATION AND MERGERS NOT MEETING TARGETS The drive to do more with less has meant that the delivery of care is being reorganized. Hospitals Given the current challenges, traditional are rapidly consolidating in the three countries to enable economies of scale and concentration of provider improvement programmes based on specialist services with the resulting benefits derived from the amalgamation of experience and short term cost reductions are failing to deliver expertise. long-term and sustainable benefits. The drive For example, in England, hospital alliances enable cost saving and quality improvement through to meet targets for efficiencies has meant that sharing of resources (which may include top-level management), standardization of processes and the more important question of building a centralisation of specialist services. Chains may be formed through acquisition, merger or contracts. high-performing organization that effectively allocates its resources has been overlooked. We found across the three countries that in GERMANY36 areas where the focus has been on developing No. of hospitals Provision of hospitals: a culture where staff can drive frontline improvements, the health system has made PUBLIC NOT-FOR-PROFIT PRIVATE positive gains. The acute sector is finding that 1994 to effectively manage high demand, working 2014 2,337 within a wider system can unlock networks that 1,956 -44% -32% +56% facilitate better healthcare for patients, which is not necessarily in hospitals. ENGLAND37

PERFORMANCE No. of acute trusts FINANCE including WORKFORCE SAFETY 2000 2016 There has been an increasing trend towards the QUALITY 180 20 150 mergers emergence of hospital chains, as observed in since 2010 Greater Manchester, Sheffield and London.13

U.S.38 No. of hospitals As hospitals, healthcare systems, and providers align to maintain financial 1975 2014 sustainability, By 2020, approximately 1 in 5 7,156 5,627 M&A activity is hospitals are expected to be sold, accelerating.12 merged, or closed. 18 SAME DIFFERENCE | A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS

CHANGING CARE MODELS: PROVIDERS INTEGRATED CARE FIT FOR THE FUTURE

INTEGRATED CARE - THE CHANGING GERMANY39 ROLE OF HOSPITALS As the healthcare industry moves towards clinically integrated, patient-centric care 200 7 2 9.3% models, the focus for hospitals is on becoming “Innovation Fund” nationwide disease- The two largest of all insurees in an entity within an network of care provision. pilot projects management-programmes DMP are “Type the SHI-system are Where providers are aligned in a locality or initiated by the German (DMP) for chronic diseases 2 diabetes participants in a DMP. region, it is possible to leverage best practices Health Ministry, with an covering 6.5m insured people mellitus” and annual volume of €300m in one or more programmes “CHD”. and care protocols that are consistently applied and transparent. The three countries 40 are developing innovative ways of joining- ENGLAND up care across whole systems and health economies. Here are some examples: 50 VANGUARD SITES: Better Care Fund partnerships 9 13 6 8 13 between CCGs and PACs MCPs enhanced urgent/ acute care local authorities. care homes emergency collaboration care sites sites U.S.41, >744 >23.5m 397 public and private individuals covered total Medicare ACOs as of Jan 2015. Shared Savings ACO programs, located in 49 of 50 states42 A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS | SAME DIFFERENCE 19

NEW MODELS OF CARE: LOOK AT THE model brings together a group of providers with networks to implement an initiative throughout PATIENT’S WHOLE HEALTH NEEDS responsibility for care for a group of patients New York State which aims to redesign the with defined similar needs in which payment healthcare delivery system to reduce avoidable As part of NHS England’s Vanguard is contingent on care provision, meeting care inpatient hospital and programme, hospitals are aligning with GPs quality metrics and reduced spending. ACOs use by 25% in 2020. in Primary and Acute Care Systems (PACS) place responsibility on providers to develop to create a single provider structure. This innovative care pathways that increase patient ACOS STRONGLY SUPPORTED BY GERMAN vertically integrated system, currently being satisfaction and reduce cost. MINISTRY OF HEALTH developed in places like Wolverhampton, allows hospitals to open general practice In addition, managed care organizations Similar initiatives in Germany include provider surgery centres and take accountability (MCOs) such as health maintenance alliances that promote integrated care. PCPs, for a patient’s whole health needs. It also organizations (HMOs) and preferred provider hospitals and municipalities are undertaking links Emergency Departments into urgent organizations (PPOs), are another type of care a range of pilot projects, including building care networks in the community to ensure delivery technique. These organizations aim to networks across the community to facilitate specialist care is accessible and patients can ‘manage care’ to reduce costs while improving patient tracking and navigation. Integrated spend more time at home depending on upon care being delivered. MCOs not only care models are being implemented across clinical need. coordinate care but organise and commission health economies, with patient-centric the provision of healthcare services for covered operating models that are comparable to THE ADVENT OF ACCOUNTABLE CARE patients to achieve efficiencies by controlling ACOs. Additionally, within specific SHI ORGANIZATIONS (ACOS) utilisation as well as pricing and payment of contracts, higher flat-fee payments are healthcare services. made if a patient participates in the network It is expected some of these integrated models structure relative to those patients who do will become ACOs. While still largely an ACOS THAT WORK – THE U.S. MODEL not. The German health system is particularly emerging feature in England, the ACO model challenged by some weak care provision is more prevalent in the U.S., with a number of Traditionally, U.S. hospitals have often across states, particularly in rural areas. ACOs implemented across 49 states. The ACO been accessed for high and low care needs. Therefore the Ministry of Health is driving However, through ambulatory urgent care reform and has developed the Innovation centres and increased PCP capacity, hospitals Fund to support pilot projects to address care are working with the system to develop provisions, such as regionally coordinating more accessible alternatives. These include care, to offer seamless care pathways and implementing patient portals and call centres redistribute health resources. to facilitate patient tracking or navigation and case management. By implementing these As detailed in our case study, BDO Germany services, hospitals reduce readmission risks advised and supported strategic planning to and facilitate care coordination and patient redesign a municipality’s healthcare model, hand-offs through a collaborative network working to introduce this key evolution of that reduces care costs. As detailed in our case the provider model into the German health study, BDO USA has worked with provider system. 20 SAME DIFFERENCE | A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS

CASE STUDY DELIVERY SYSTEM REFORM INCENTIVE PAYMENT PROGRAM, MEDICAID REDESIGN – BDO USA

Through the Delivery System Reform Incentive Payment (DSRIP) program, The Centers for Medicare and Medicaid Services (CMS) and the New York State (NYS) Department of Health (DOH) are reinvesting £3.8bn ($6.42 billion) in Medicaid funding to restructure the healthcare delivery system and support transition of care delivery from a largely inpatient focused system to a community-based system that addresses a person’s medical and behavioral health needs, as well as the social determinants of health. BDO works with eight Performing Provider Systems to deliver the transition to the new healthcare system.

The goals of the five-year DSRIP program safety net providers, including hospitals, implementation of a DSRIP program. Over are numerous, with the most notable being health homes, primary care practices, SNFs, the course of two years, BDO provided data to reduce state-wide avoidable inpatient clinics, Federally Qualified Health Centers analytics and IT support, clinical expertise, hospital use by 25% over five years, expand (FQHC), behavioral health providers, finance and modelling, Project Management community based care with a focus on primary community based organizations and others. Office (PMO) and workforce support, among care and behavioral health, and transition DSRIP shifts funds from paying for coverage to other services. BDO continues to support the Medicaid to a value-based reimbursement paying for performance improvement efforts. Limited Liability Corporation (LLC), an ACO- system where payments are 90% at risk. like organization formed by the two hospital BDO was engaged by two hospital system To support the transformation, entities leads to support the clinically integrated leads located in New York City, serving over responsible for creating and implementing network of providers. 200,000 Medicaid/uninsured patients that the DSRIP program formed groups known as had formed a PPS to support the application The following provides an overview of the Performing Provider Systems (PPS). A PPS for funding and the development and services provided: includes a designated lead provider(s) plus

PLANNING DESIGN IMPLEMENTATION

• Developed project governance and infrastructure • Convened project implementation teams • Established the Project Management Office and an implementation timeline for DSRIP and developed five-year project plans around and served as interim PMO supporting the program planning implementation of projects for behavioral implementation of healthcare transformation health/primary care integration, care transitions programs/projected • Developed and implemented an approach and and care management, disease management, materials for educating and engaging with key population health improvement and clinical • Developed the preliminary budget and funds stakeholders including providers and community- integration flow including distribution plan for Value-Based based/social services organizations Payments (Bonus funds) to providers and social • Developed approach and work plan around value service organizations in the network • Supported the provider selection process and based payment transformation and financial network building sustainability • Facilitated discussions/contract development with key PPS vendors including health • Facilitated upwards of 100 stakeholder meetings • Convened governance committees to discuss information technology vendors with various provider groups DSRIP implementation strategies including: Finance Committee; Diversity & Inclusion • Supported the development of an overall • Collected and analyzed clinical and financial population health strategy around clinical performance data Committee; Information Technology Committee; and Clinical Committee, among others integration and data and informatics • Developed and implemented community surveys • Currently supporting the development and aimed at the most vulnerable population • Developed the PMO staffing plan, job descriptions, roles and responsibilities and implementation of a Value-Based Payment • Facilitated and supported DSRIP clinical and training materials for newly formed business strategy and contract design, based on quality population health project selection and design entity to act as the anchor for the Clinically and cost metrics, with various payers for the Integrated Network. PPS network’s attributed patients including • Completed literature/best practice review for facilitating the PPS’s discussions with payers. facilitated provider discussions around project implementation • Secured more than £120 million ($200 million) in federal/state funding. A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS | SAME DIFFERENCE 21 22 SAME DIFFERENCE | A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS

CHANGING CARE MODELS: PRIMARY CARE

WHAT ABOUT PRIMARY CARE? COMMUNITY CARE Outside of the hospital, primary care Key to the success of any integration is represents the most common point of care a strong community care system. Across across all three countries. In the U.S., primary the three countries, there is a focus on care represents more than half of total improving accessibility to community care patient visits but only a small portion of total and reducing costs through delivering care in healthcare spend. Building upon primary care the most appropriate care setting. In England, services, PCMH are innovative care models community care is an integral part of the that coordinate care through PCPs to ensure healthcare system. As part of the New Models patients access appropriate care. PCMH is a of Care programme, community and primary designation primary care clinics achieve and care is integrating to form Multi-Speciality is a growing trend due to financial benefits. Community Providers (MCPs), moving PCMH provides patient-centric services that specialist care out of hospital and into the determine appropriate treatment, ensure community. medication management and appointment For example, in Manchester, BDO supported follow up and emphasise behavioral health the City Council and CCGs to develop integration and care management services. integrated teams to co-locate health and In England, GPs are coming together to form care professionals in community settings, Federations to achieve economies of scale and defining the strategy, identifying the cohorts, deliver efficient care. They also support the quantifying the benefits and assisting with combining of different health professionals business cases for investment. This approach and host multi-disciplinary teams to support focuses on place-based care that is wrapped care management for complex patients. around the patient and supports them to remain independent. In Germany, family-doctor centred healthcare (hausarztzentrierte Versorgung) is the pillar Germany has developed rehabilitation of primary care. GPs operate similar to and prevention programmes rooted in the ACOs, contracting through health insurance community. Medical rehabilitation is an arrangements and maintaining special integral part of the German healthcare payment structures. GPs enter into contracts system, alongside outpatient care by with patients to agree that, with the exception community-based doctors and acute care of an emergency, they will visit the GP as with the goal of improving health and avoid primary point of contact. Under the contract long-term care needs and disabilities. These terms, GPs receive higher remuneration for care models are incentivized by selective contracted patients. contracting and integrated care contracts between Sickness Funds and providers. A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS | SAME DIFFERENCE 23

In the U.S., following hospital discharge, MENTAL/BEHAVIORAL HEALTH – GERMANY43 patients are often transitioned to Post-Acute OPPORTUNITY FOR INTEGRATED Care (PAC) providers to support rehabilitation HEALTH PROVISION people receive closer to home. PAC involvement is likely mental health Mental health problems constitute the largest services annually to increase in line with pressure to control 3.9m single source of world economic burden, Medicare spending, meaning PACs are taking with an estimated global cost of £1.6 trillion on responsibility for health outcomes. - greater than cardiovascular disease, chronic 2.8m 1.1m 5 Hospitals are evaluated based on respiratory disease, cancer and diabetes on outpatient inpatient readmission and medication compliance their own. Across all three countries, mental following discharge to a SNF or home healthcare (MH) is receiving increased ENGLAND44 setting. SNFs provide short-term nursing attention and incentive to integrate with care and rehabilitation services, including physical care to treat the patient as a whole. physical, occupational and speech therapy. MH care is typically provided in primary and 5.7% Readmission rates from SNFs have declined community settings while acute care settings 1.8m from 15.6% to 14.9% between 2011 and support inpatient treatment. people accessed of this number mental health were admitted to 2012, as collaboration between hospitals and Integrated systems, including ACOs in the U.S. services (2014/2015) hospital for mental SNFs have led to the development of clinical 3 and Vanguards in England, are increasingly health services pathways that proactively target preventable incentivized to manage care for patients diseases and reduce readmissions to avoid with mental health issues by collaborating to 45 Medicare penalties. U.S. deliver proactive care. Due to the prevalence Non-traditional players, including retail of low and moderate mental illness occurring cases with mental clinics and private urgent care centres are with chronic physical conditions, models disorder as primary diagnosis. entering the market. In the U.S., large retailers of care are integrating behavioral therapies 63.3m including Walgreens, RiteAid and Walmart with primary care services, supported mainly hospital discharges for psychoses-related have in-store urgent care clinics. through Value-Based Payments. 1.5m diagnosis4 24 SAME DIFFERENCE | A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS

TECHNOLOGY THE FUTURE OF HEALTHCARE IS HERE

TECHNOLOGY TRENDS IN HEALTHCARE DISRUPTION DRIVEN BY START-UPS WHAT WILL THEY THINK OF NEXT? The economic pressures across the health Across the three countries, numerous start- We believe that the opportunities presented systems coincide with the increasing role of up companies are developing technology by technology to accelerate readiness for digital technology in healthcare. We are seeing to facilitate health-coaching and self- demand, better target healthcare utilisation a number of private companies leveraging management through mobile applications and improve how patients take care of digital technology in other industries to and wearables. In the U.S., an estimated 34 themselves are critically important for the engage customers, understand preferences million units of wearable technology were sold health sector to understand and engage. and streamline their services. Its no surprise, in 2015. While it is beyond the remit of this paper to therefore, that health systems in England, Online applications and telemedicine tools provide a comprehensive discussion of all the U.S. and Germany are exploring how have also entered the market to replace office new healthcare technology, here are some of technology might be tailored to improve care visits and provide high-level consultation to the key ideas that present opportunities for delivery and overall population health. patients, allowing faster access to advice, healthcare systems considering the role of Implementation of integrated electronic improved triage and referral to specialists. technology in their service delivery and design. patient records across providers are being In the U.S., telemedicine is used to support viewed as a key step in enabling seamless mental healthcare with Medicaid programs care pathways. The use of telemedicine and covering payment for telemedicine treatment. telehealth are vehicles that help professionals In Airedale, England, telemedicine and Skype address low-acuity needs in more cost- are supplementing and supporting care to effective ways. For commissioners, data reduce avoidable hospital admissions from analytics to unlock a deeper understanding of care homes. Assistive technology is also used the drivers of poor health and effective care to support independent living and patient may provide a key ingredient for sustainable recovery. healthcare in future generations. The recent passing of the E-Health Act in Germany has introduced certain reimbursement models and fees for tele- medical healthcare models, and indicates a commitment towards leveraging technology in healthcare. The introduction of an Electronic Health Card could also support the digitisation and increased accessibility of patient records. A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS | SAME DIFFERENCE 25

BLOCKCHAIN THE INTERNET OF THINGS (IoT) ANTIBIOTICS Supporters of the technology claim that In the healthcare context, IoT can be applied Given the decreasing efficacy of antibiotics, blockchain could revolutionise the world, to diverse uses such as inventory management there is potential for new technologies to including a massive potential benefit for (automatically re-ordering medical products); maximise the lifespan of existing antibiotics. healthcare. Based on a trusted network, using data from patient bracelets/tags to better Technologies such as 'anti-virulence materials' early stage ideas focus on ensuring identity understand and improve clinical care pathways; work not to kill the pathogen but to limit verification prior to accessing an individual’s or using apps like Kaa to improve hospital asset its ability to spread; Another option are patient record, anonymizing large amounts management. While we understand the benefits, 'anti-microbial nanoparticles', which work to of verifiable data for research and promoting the challenges will always be for physicians release antibiotics at a sustained rate or in supply chain governance. and administrators to synthesise and use an environmentally responsive manner, thus the flood of data, as well as the obvious data lowering frequency of use and minimizing security concerns. systemic side effects. Using nanoparticles to deliver two or more drugs may also provide a ‘synergistic effect’ and suppress drug resistance.

ARTIFICIAL INTELLIGENCE (AI) Is it possible to teach a machine to replicate the role of a health professional? AI start-ups such as Babylon and Quest (partnering IBM Watson) are dedicated to synthesizing data in order to more accurately triage patients. The ROBOTS key element for AI is the ability to 'learn' 100% This technology covers a wide range of potential of the medical research published every day uses, from service robots providing in-home care whilst simultaneously comparing that data with (eg monitoring vital signs of elderly patients and a presenting patient’s medical record. sending data to doctors) to micro robots inside the human body, assisting surgeons with a range of tasks: capturing images from microcameras, assisting with breaking down plaque in arteries and screening for diseases.

WEARABLE TECHNOLOGY PHARMACEUTICALS Not such a new trend, the key for the health Companies are seizing on technology as the next sector is to evaluate personal data from critical business challenge, including increasing wearables to ensure that any benefit (eg personalization to tailor drugs to patient early indication of stroke or cardiac arrest) is lifestyles, patient data-driven analytics to identified. In a truly integrated health system, maximise research and development investment warnings would be sent to patients to increase and enabling later-round clinical trials to take self-care, such as taking medication, monitoring place outside of the laboratory, in more natural exercise and diet as well as planning GP visits. settings. 26 SAME DIFFERENCE | A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS

CASE STUDY HEALTHCARE REDESIGN STRATEGY – BDO GERMANY

BDO Germany provided strategic advisory work for a municipality with more than 350,000 insured people located in North Rhine-Westphalia, supporting the redesign of their healthcare provision model (“Healthcare Strategy 2025 Kreis Lippe”).

Healthcare providers in this region include: The district faces a number of challenges including: 30 INPATIENT REHABILITATION CLINICS, 2 MENTAL HEALTH CLINICS PHARMACIES, MEDICAL DEMOGRAPHIC UNEQUAL ACCESS ONE OF THE BIGGEST NURSING SUPPLY STORES CHALLENGES MUNICIPAL HOSPITALS HOMES IN GERMANY WITH 29 REGIONAL INEQUITIES SPECIALIZATIONS, 3 IN SPECIALIST LOCATIONS AND NEARLY AGEING GENERAL HEALTHCARE 3,000 EMPLOYEES MORE THAN 20 OUTPATIENT NURSING PRACTITIONERS, 420 PRACTITIONERS PROVISION, HOMES WHO HOLD KEY INCLUDING THE RESPONSIBILITY FOR AVAILABILITY OF PRIMARY CARE SPECIALISED NURSING BDO Germany managed the policy process, also addressed challenges faced by rural CARE providing analysis and advice to ensure that German regions. We incorporated elements of the acute hospital was seen as the key player disruptive and emerging healthcare solutions HIGH COSTS CARE QUALITY in coordinating the continuum of care. to create a conceptual framework where care provision is wrapped around patient needs. ANALYSIS PHASE HIGH INVESTMENT LACK OF OUTCOME NEEDS IN LOCAL BDO’s analysis started with a patient- COORDINATION HOSPITALS DUE focused question: what is the type and level of The conceptual framework BDO developed ACROSS CARE TO LOW PUBLIC SETTINGS patient demand for inpatient, outpatient and supported the allocation of resources based SUBSIDIES emergency care? on patient needs to the acute hospital and the other specialised care providers (mental health In all three segments, big data consisting of clinics, outpatient nursing homes, inpatient patient records and health statistics were nursing homes, specialised doctor´s offices BDO DELIVERS analyzed to understand disease drivers, patient and rehabilitation clinics). BDO also facilitated outcomes and current activity and demand BDO’s work with the municipality was critical the creation of an organized network around for services. We modelled future predictions in developing the “Health Care Strategy GPs to ensure effective first diagnosis, gate of healthcare demand, accounting for 2025 Kreis Lippe” and the accompanying keeping and chronic disease management. prospective epidemiological and demographic business plan. changes (morbidities), political trends in This integrated healthcare model has been BDO Germany has also been engaged to shifting healthcare delivery from inpatient to operationalized, and a business plan produced negotiate the required financing with various outpatient care and technological innovations. for a £104million (€130mn) investment over bank consortia. the coming years. 50% of this investment will The municipality’s key objective was to be covered by the municipality, public funds We are pleased that due to the success of this maximise the benefits felt by patients from and the hospital and the other 50% will be pilot project, it will now be implemented in a redesign of the healthcare model, which financed by bank loans. other rural German municipalities. A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS | SAME DIFFERENCE 27 28 SAME DIFFERENCE | A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS

CONCLUSION A HEALTHY FUTURE?

CHANGE IS THE ONLY CONSTANT POST-DIAGNOSIS: CAN WE TREAT THE While innovation and integration in Germany HEALTH SYSTEM? is being facilitated and incentivized by the Given the number of care initiatives in place KHSG and E-health law, further initiatives as well as the economic factors addressed, the One of the solutions to these changes is the and regulations are required to transform current healthcare systems across England, evolution of new and innovative contracting healthcare into a patient-based and efficient the U.S. and Germany are likely to experience mechanisms. With the shift to value-based system as patients begin to use quality incredible change over the next five years. payments, organizational viability will depend indicator information to determine where and on how well alternative payment models how they access healthcare services. DEALING WITH A CHANGING HEALTHCARE are understood, planned for, and adapted to. ENVIRONMENT Providers must ensure sustainable clinical Moreover, given the role of the private sector models and infrastructure to support a in the U.S. healthcare system, investors will Managing the changing environment in which primarily outcomes-based reimbursement continue to evaluate capital and profitability healthcare systems operate is vital. Significant system. Health leaders across the three requirements of new patient-centred and demographic shifts will lead to an increase countries will have to ensure collaboration outcomes-based operating models while in the elderly population as an absolute between provider organizations previously healthcare consumers will begin to access more number as well as a proportion of the total competing for the same slice of the market transparent information to make informed population. In Germany, health planners will and incentivise operating models that decisions about their care based on the real and need to develop strategies to deal with the promote place-based, patient-centric care. perceived value of clinical services. ageing as well as decreasing population. The political and economic imperative to achieve NEW CARE MODELS: THE BEACON OF HOPE financial sustainability will challenge the three countries, such as in England, with a number In England, given the initiatives to integrate of NHS provider organizations facing deficits, health and social care, more ACO-type radical solutions will be needed to achieve models may be developed to bring together strategic cost reduction. The U.S. will continue different disciplines, and the Vanguard and to address impacts of the ACA and expanded STP initiatives will lead to whole system public coverage while also developing care planning and new organizational forms. models to address the ageing population. However, significant challenges will arise Health systems across the globe will also have around integrating a multi-skilled workforce, to effectively adopt digital technologies to integrating different data systems, and the support a move to financial sustainability, and effective use of data and analytics to inform also provide agile healthcare to patients. place-based care. A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS | SAME DIFFERENCE 29

HOW CAN BDO HELP? BDO UK’s Public Sector Consulting practice works with commissioners, providers BDO’s global network is skilled in working and regulators to deliver healthcare with payers/insurers, commissioners and transformation. BDO supports clients to a wide range of healthcare providers to deliver financial sustainability and quality advise on healthcare transformation. Our improvement. We have helped develop some international scope enables BDO to draw of the most innovative Vanguard initiatives on experience and skills from 152 countries and support the implementation of STPs. to support our clients to deliver innovative solutions for organizational challenges. Our BDO USA’s Center for Healthcare Excellence combined service offering includes: & Innovation has been at the forefront of • Supporting the transition to value or healthcare transformation. Most notably, BDO outcomes-based payments, working with is heavily engaged in implementing Medicaid providers, payers and investors payment reform in New York State, supporting providers as they fundamentally restructure • Working with health economies on system- the healthcare delivery system to transition wide transformation and the integration of care delivery from a largely inpatient focused acute, primary and community providers to system to a community-based system and drive patient-centred care toward value-based reimbursements. • Organizational and leadership development to support the process of The BDO Centre for Health Economics in change Germany provides strategic advisory and project management for providers, Sickness • Project and programme management to Funds, municipalities and private equity. support the implementation of delivery BDO develops network-structures, conducts improvement initiatives healthcare requirement analyses, and • Data analytics and financial modelling to performs patient-centred market strategy, determine the scale of need and quantify agreements, and contracts. BDO has advised potential benefits from change. on complex transformations for providers including developing strategies on redesign and continuous project management. 30 SAME DIFFERENCE | A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS

UNDERSTANDING THE TERMS WE USE FREQUENTLY USED ABBREVIATIONS EXPLAINED

ENGLAND U.S. GERMANY

2010 Patient Protection and NHS The National Health Service ACA SHI Statutory health insurance Affordable Care Act

Clinical Commissioning Group (or CCG ACO Accountable Care Organization KHSG The Hospital Structure Act Groups)

Multi-specialty Community Centers for Medicaid and The Funding Law for mental MCP CMS PEPP Provider Medicare Services health

PACS Primary and Acute Care System FQHC Federally Qualified Health Centre

Sustainability and Transformation Mental Health Parity and STP MHPAEA Plan Addiction Equity Act

These programmes provide Vanguard investment to develop new PAC Post-Acute Care Providers models of care

PCMH Primary Care Medical Home

PCP Primary Care Provider

PPS Performing Provider System

SNF Skilled Nursing Facility

CURRENCY For ease of comparison, this paper uses £GBP as the currency throughout. Figures from the U.S. and Germany have been converted at the approximate exchange rate at the time of the data. The original $ Dollar and € Euro figures are included throughout. A COMPARISON OF INTERNATIONAL HEALTH SYSTEMS | SAME DIFFERENCE 31

REFERENCES

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Source: http://www.nhs.uk/NHSEngland/thenhs/about/Pages/ et_al_versorgung_ptj2014.pdf overview.aspx 44. http://www.nhsconfed.org/resources/key-statistics-on-the-nhs 45. http://www.cdc.gov/nchs/fastats/mental-health.htm. FOR MORE INFORMATION: This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. STEVE SMURTHWAITE Please contact BDO LLP to discuss these matters in the context of your particular circumstances. BDO LLP, its PARTNER, BDO UK partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision +44 (0)20 7486 5888 based on it. 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