Spend or Save?

5 July 2009 (Last Updated July 5th, 2009 18:30)

The latest projections for global healthcare spend are seemingly contradictory. Some researchers are projecting staggering rises in expenditure over the next three to four years and others forecasting much slower growth. Eucomed's Rosanna Tarricone believes there is a more realistic middle ground for the medical devices industry. She discusses with Lorrie Kelly the drivers that are currently affecting the market, and where manufacturers are likely to find the best opportunities for future growth.

Spend or Save?

Despite forecasts projecting healthcare expenditure reaching all-time highs, as illustrated by a recent US economic report which predicted healthcare spend would rise to a fifth of overall US GDP in the next five years, Rosanna Tarricone believes growth will be more modest and that such projections will not hold up across the global healthcare market.

For a US healthcare system primarily funded through private insurance, the economic downturn has instead meant a decrease in demand for non-essential and non-life threatening treatments. This trend is not expected to change over the next few years as more people put off what they view as unnecessary medical treatments until they feel more financially secure.

European countries are equally affected by the economic downturn despite having different, primarily public, funding sources. Governments are systematically eliminating non-essential services in an attempt to reduce overall healthcare spend and hospitals remain under constant pressure to manage their budgets more efficiently.

"At the end of the day, I'm not so confident that healthcare expenditure will rise at the same rate we experienced six months to a year ago," says Tarricone. "Instead, we will see expenditure increase at a more modest rate than has been recently predicted."

"More people put off what they view as unnecessary medical treatments until they feel more financially secure."

Areas of growth

Ageing population. In terms of overall growth drivers in healthcare spend, Tarricone believes that the ageing population will remain the strongest catalyst for healthcare expansion. "The ageing of the population is interlinked with another important driver of increasing expenditure – changing epidemiology," says Tarricone.

"We are witnessing a change in focus from acute and infectious disease to chronic conditions. Obviously this is related to the ageing population. These types of conditions – chronic conditions – normally demand more services, not only in terms of quantity but also in terms of complexity. The case mix is becoming more complex than in the past, so healthcare systems will be pushed to deliver a higher quantity of services together with a different level of complexity."

Patient expectations. Tarricone also points to patient awareness as a significant growth driver. "The patients of today are vastly different from the patients of yesterday," she explains. "The level of expectation is getting quite high and is consistent with the same level of expectations that we can see in other consumer sectors.

"At a very simplistic level, consumers today are used to doing things such as home banking, They expect to have the same rate of innovation and the same accommodation within the healthcare sector. They expect to be served quicker and better than in the past and that is because they have reached a higher level of expectation."

Improved diagnosis and treatment. "If we look at the economics and developments in screening programmes, for example, we can easily understand how these have an implication and impact on the quantity and quality of services that the patient will be requesting, and the system will be offering in the future," says Tarricone. "Also, physicians have more instruments to diagnose latent diseases that may have remained undetected in the past."

Lifestyle. Consumer lifestyles are also increasing the prevalence of certain types of diseases. "This could seem a contradiction because on one side, we see today that patients are more responsible and more aware of their own health, including types of treatment strategies that might be offered to them – a higher level of education globally speaking," Tarricone adds. "Paradoxically we are also witnessing a higher level of unawareness in terms of lifestyle choices that are not productive for health, such as obesity."

Obesity remains a very heated issue for healthcare policy makers, since it has been directly related to increased risks for cardiovascular diseases. Because obesity is almost entirely preventable through diet and exercise, many European countries have been discussing methods to control consumer diets with ideas such as "fat taxes" suggested as deterrents.

"The same can be seen for alcohol consumption and tobacco, where in some cases there is a higher awareness but the data is not showing a decline," says Tarricone. "In some countries, alcohol consumption is steadily increasing."

Changing family dynamics. "The last significant driver relates to changes in social dimensions," says Tarricone. "If we compare the average family size to past generations, especially for countries in the Mediterranean region, it has changed a lot. The increasing rate of employment for women has also changed the way that they interact with their own relatives. This has a direct implication in terms of demands on healthcare services. Many people today are no longer taken care of by their own families and they must therefore go back to the healthcare and social care systems to ask for services."

Manufacturing opportunities

Tarricone believes these growth indicators will mean increasing opportunities for medical device manufacturers. There are a larger proportion of people who are living longer and needing to be independent because of the change in family and household structures. The medical industry has the potential to offer and deliver devices and technologies that can help these people not only to be independent and autonomous, but also to enhance their quality of life. "All of the technologies that can be delivered through the homecare sector will offer endless opportunities for future growth," says Tarricone. "The homecare sector is something we should target much better than we do today."

"Home monitoring systems could provide healthcare systems with much-needed economic efficiency gains."

Homecare is not only an ideal solution for patients, it also benefits healthcare systems. Healthcare systems are simply not well equipped to deliver the quantity of hospital services to this increasing proportion of patients, who must be treated outside of hospitals and other institutions. The technologies being developed can be of benefit to these patients, allowing for telemeasuring and telemonitoring.

This would enable physicians to be in constant contact with their patients without crowding hospitals. It also allows patients to be at home, leading more normal lives and in some situations it could even help them return to work.

As quality of life is becoming more and more important, long-term physical outcomes are no longer the only important aspects in treatment programmes. In terms of all the technologies that can be delivered to patients, even though they may not be beneficial to increasing survival, these technologies can allow patients to return home and more fully enjoy the rest of their lives. This is an area that could be exploited even more in the future.

Home monitoring systems could provide healthcare systems with much-needed economic efficiency gains, as well as reducing hospital stays. "If we think about the many non-invasive technologies that are booming and spreading across the various specialities in the healthcare sector, this is something that helps hospitals, physicians and the entire system to be more efficient as the length of hospital stays is reduced." says Tarricone.

"There are great benefits in terms of cost savings from the hospital side, as well as benefit to the patient in terms of being released to go home quicker. This in turn means a great benefit to the economy as a whole in terms of productivity."

Key challenges

Engaging patients. All of these opportunities are themselves challenges if the industry is not capable of driving the game with the right focus. "In order to fully exploit the great potential that exists in the market, we need to change the way we collaborate with some of the important stakeholders, beginning with our patients, says Tarricone. "As an industry, we are not used to viewing patients as our consumers. In the past we have tried to focus our attention on physicians and hospitals as the end clients.

"Today, there is a greater education and awareness among patients. Although this may not apply to all sectors, for many sectors the end client is the patient, not the hospital or physician. I think we can improve the way we speak to and collaborate with patients and patient organisations."

Working together. "The same can also be applied to our relationship with decision makers at different levels of government," says Tarricone. "This would include local decision makers at hospital level, as well as regional, on up to national levels. The standard attitude of the industry has been to view these decision makers as antagonists. But they are and should be our best allies.

"Ultimately, we are striving and fighting for the same goals – to improve health outcomes, enhance the quality of life for patients and to expand the number of patients who can get access to modern care, without making the system financially unsustainable. It is not good for any of us if the systems are unable to cope financially so, as an industry, we need to find synergies with healthcare systems in order to achieve these common goals."