• Industry: Healthcare
  • Type: Press release
  • Date: 1/22/2014

Copying western models is ‘high cost and high risk’, KPMG report warns emerging healthcare systems 

‘Necessity: the mother of innovation’ says only whole systems solutions will deliver long-term sustainability’

Emerging health economies face major long-term financial problems if they try to replicate hospital-based western models, a hard-hitting new report by KPMG International warns.

Necessity: the mother of innovation highlights significant underlying financial weaknesses in the health systems of a number of developing countries.

And it concludes that instead of looking at established ways of working, emerging health systems need to seize the opportunity to develop new, flexible, community-focused solutions.

“Around the world developing nations are struggling to adapt to the changing needs and expectations of a new, emerging middle class,” says report co-author Mark Britnell, Chairman, KPMG Global Healthcare Practice and Partner, KPMG in the UK.

“The last decade has seen a huge explosion in the number of people moving from poverty to financial independence. Over a billion people, with a combined wealth of USD 33 trillion, are now thought to belong to this new population bracket.”

“Such a major demographic shift is putting massive pressure on health systems. We don’t believe that they can respond to these challenges by copying what is already out there. To be sustainable they need to find innovative new ways to respond to these changing demand patterns and escalating costs.”

Compiled with input from over 70 KPMG member firm clients and health leaders, Necessity: the mother of innovation scale argues that in trying to meet rising middle class aspirations, a number of countries are looking to western-style healthcare models built around high-tech, secondary care interventions.

But, the report concludes, the volatile nature of rapidly developing economies means that many of these systems are failing to translate this high cost, hospital-based approach into real value.

Instead, countries and systems that are taking a whole systems approach, using community care models and payment regimes that focus on population health improvement, are the ones most likely to be delivering affordable, sustainable, high quality care.

Report Co-author Sven Byl, KPMG’s Head of Healthcare for the Africa region and Partner, KPMG in South Africa, says: “As economic momentum increases, governments are investing more to deliver the improved healthcare that newly enfranchised citizens demand. And while each country will follow a unique path to healthcare development, it is evident they are facing many similar challenges – delivering higher quality and broader access for sustainable costs.

“We found that in many cases health system architects have focused on one part of the value chain, for example low cost estates or well developed care pathways. However, expensive medical technology or inappropriate skill mix has held them back and prevented them from delivering equitable improvements at sustainable cost.”

“Those systems that have managed to see the whole jigsaw, put the pieces together in right order and move beyond simply looking at ‘low cost per transaction’ are the ones who are really reaping the benefits.”

Necessity: the mother of innovation highlights six key areas that emerging health systems should focus on in order to keep costs down without compromising on quality:

  • People – redesigning roles, processes and training to ensure staff are operating at the full extent of their licence and training;
  • Pathways – separating complex and routine work, identifying bottlenecks and moving away from ‘batching’ treatments;
  • Standardization – demonstrating strong commercial discipline to get the most out of drug and equipment purchasing;
  • Environment – focusing on the use of flexible, future-proof, energy-efficient buildings;
  • Technology – using technology such as smartphones, point of care testing and portable diagnostics to bring services and decision-making closer to patients;
  • Governance – creating management structures that empower frontline staff and encourage experimentation.

The report also highlights the key role played by ‘activist’ payers in shaping system behaviors in the most successful low-cost economies:

  • System costs are being regulated by the level of coverage and the types of treatment covered by governments and insurers;
  • Patient behavior is being shaped by financial incentives such as discounted premiums for adopting healthier lifestyles;
  • Provider proprieties are being re-shaped by contracts, which focus on overall population health rather than specific treatment outcomes.

Mark Britnell concludes: “Strong evidence has emerged to show that the most effective low cost care is being delivered by countries that have taken a whole system view.”

“Getting real value in a market place where aging populations, technological advances and rising expectations are constantly driving up costs requires a radical approach involving a change in the traditional dynamic between patients, payers and providers.”

Download Necessity: the mother of innovation (PDF 1.41 MB).

Jennifer Samuel

Head of External Communications
Global Industries

Tel: +1 416 777 8491

About KPMG’s Global Healthcare Practice

Healthcare systems around the globe are facing more complex challenges than ever. KPMG professionals/firms are committed to providing long-term support to clients as they tackle these challenges and seek to transform the way that healthcare is provided. With deep industry experience, insight and technical support, KPMG firms are among the leaders in delivering a broad range of audit, tax and advisory services to meet the unique needs of healthcare policy-makers, providers and payers.

KPMG firms have more than 3,000 dedicated professionals in the healthcare team, with skills in strategy development, cost optimization, financial management, clinical performance improvement, market development, tax planning, mergers and acquisitions, commercialization and organizational development. We have one of the largest, best equipped and most experienced healthcare advisory teams.

Find more information or join the conversation on LinkedIn with KPMG Healthcare.

About KPMG

KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 155 countries and have 155,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

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Necessity: the mother of innovation

Necessity: the mother of innovation
Powerful demographic shifts are transforming the way countries with developing and maturing health systems think about the financing care.

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