All societies face the challenge of rising healthcare costs, driven by aging populations and an increasing demand for new diagnostics and treatments.

Rising demand and costs

Demand for healthcare services continues to rise globally as populations age and individuals live longer with more chronic diseases, which often results in more frequent acute exacerbations requiring acute unscheduled care. In addition, the continuous development of new diagnostic and treatment options drives demand for these services among the public, who wish to take advantage of these. Global healthcare spending continues to grow at a faster rate than GDP in many countries. Average healthcare spending among OECD countries is approximately 10% of GDP. The U.S. is the world leader in healthcare spending at nearly twice that amount, i.e. 18%.

Healthcare cost in relation to GDP 1970–2016. Source: OECD. These growth rates in healthcare spending are not sustainable over the long term.

Healthcare delivery is organized in silos

Healthcare delivery systems tend to be organized by specialty silos and sectors of care delivery built around the providers of care, not the patients who receive care. In addition, the associated data gathering, analysis, quality and performance measurement, budget and financial management also tend to be organized around the silos and not the patient populations served by the system.

In fact, few healthcare systems function as well-integrated systems. Most function as affiliated silos and sectors that are managed individually with a focus on optimizing their own budget, resources and production.

When we try to understand how care is delivered by healthcare systems, it is relatively easy to understand and analyze the care delivered within each silo, but more difficult to understand how care is utilized by patient populations across the system of silos.

This is a result of the fact that the organization of data tends to follow the organization of the operations, which – from the perspective of horizontal patient trajectories across the system – is fragmented.

Silo management vs. system management

Financial management in healthcare tends to focus on managing silo budgets rather than understanding how they all roll up into a system level budget and managing from that perspective. This, in turns, leads to suboptimization at a system level, i.e. the silos are optimized at the expense of the whole system.

Cost accounting

Financial accounting in most healthcare systems does not provide robust understanding of actual cost of care delivery at the patient encounter level across the spectrum of care delivery. Costs in healthcare are often reported as average cost per patient encounter, rather than the actual cost of each patient encounter. This limits our ability to analyze the variability in costs, which is necessary in order to identify opportunities for improvement. Allocation of fixed cost in healthcare systems rarely reflects unused capacity, which precludes meaningful cost trend analyses over time.

Ever-growing amounts of data, limited analysis

Enormous and ever-growing amounts of data are generated in healthcare, however the degree to which we analyze that data and derive actionable insights is limited. As more healthcare systems move to adopt electronic health records (EHRs), the rate of production of new electronic healthcare data is increasing. The advent of wearable personal monitoring devices, low-cost genomic sequencing and other technology trends is further increasing the rate of growth in production of healthcare data. We tend to focus on gathering more and different types of data, but less on how to analyze existing data to produce the information and insights needed to make better decisions about healthcare system improvement and patient care.

Contact us