Challenges in Healthcare

In recent years, analysis of the proposition that ‘healthier means wealthier’ have abounded, with the vast majority of them concluding that health is a strong driver of economic growth. Therefore, the world is stepping towards universal healthcare, which provides accessible, affordable, appropriate and quality healthcare to every human. The healthcare sector is one of the fastest growing industries and it includes hospitals with primary, secondary and tertiary care, pharma, insurance, catering, housekeeping, management software and medical devices. Healthcare systems differ from country to country. What are the challenges in healthcare faced by developed and developing countries? Are they the same or different?

Healthcare systems in the West are in a transition phase. The scientific medicine which uses technology has resulted in errors, accidents, infections and medical drug disasters that cause unnecessary pain and suffering. On the financial front, the uninsured population is accessing emergency services which are expensive. And for those who are insured, the choice of treatment is insurance provider dependent. Though a lot of money is spent on healthcare, the outcome is not quite satisfactory. Healthcare systems in Europe and the US are in the end-of-life-cycle state. Healthcare in the West has to be re-invented and India certainly shouldn’t follow them but learn from their experience. The nation’s economy is driven by its healthcare economics and therefore we need a sustainable and affordable healthcare system. First let us have a brief view on different healthcare systems.

Healthcare system in US

Healthcare spending by the developed countries is always more as compared to the developing countries. The US spends 17.9 per cent of its GDP, highest in the world on healthcare, in which 45.9 per cent is from the public sector and 11.3 per cent is out-of- pocket spending. According to the World Bank data, the US health expenditure per capita in 2011 was $86081. The US spends a lot on healthcare due to higher prices for hospital visits, expensive drugs and costly diagnostic procedures. The administrative and operational costs also add an overhead to the overall expenses. A 2013 study found that about 25 per cent of all senior citizens declare bankruptcy due to medical expenses, and 43 per cent are forced to mortgage or sell their primary residence2.

Healthcare system in Europe

Most European countries provide universal healthcare for its residents. Healthcare delivery systems can be divided into two broad categories: National Health Services (NHS) on one hand and Social Security (based) Healthcare systems (SSH) on the other hand. In some countries, general practitioners are salaried employees of the local or the central government. The NHS is financed by taxes. The specialists in the larger hospitals are also employees of NHS. Those who are employed pay the premium out of their payroll, for others the government buys the premium. France and Germany are among the best healthcare systems in Europe, yet with complaints of long waits and too few beds3. According to the Organization for Economic Cooperation and Development (OECD), the European Union will see an increase of 350 per cent in health expenditure by 2050, whereas at the same time the economy is only set to expand by 180 per cent. Friedrich Breyer, a professor of economics at the University of Konstanz in Germany, calculates that in Germany alone, between 2020 and 2030, there will be a huge spike in the number of elderly people alongside an enormous drop in young and working age people. In consequence, the systems face the problem of rationing services in order to cut costs owing to an increasing demand and a decreasing tax base to pay for that demand.4, 5

Healthcare system in India

India, along with modern medicine, also uses its traditional medical systems of Ayurveda, Yoga, Unani, Siddha and Homeopathy (AYUSH). According to the WHO report in 2003, these are used by 65 per cent of rural population for primary healthcare. According to the World Bank data, in 2011, India’s health expenditure per capita was $59. The total healthcare spending in India is around 4.1 per cent of its GDP, lowest in the world1. Indian policies and framework on healthcare are very different from the rest of the world. In India, the population distribution is 20 per cent urban and 80 per cent rural. 80 per cent of healthcare services are available to this 20 per cent of urban population. The country has both public and private healthcare providers. 25 per cent of the population is covered by public and private insurances and 71 per cent of the population’s expenses continue to be out-of-pocket. As per WHO World Health Statistics 2011, 32 per cent is public and 68 per cent is private spending. Rising incomes have led to greater affordability of superior quality private sector healthcare facilities. The quality of healthcare in government-run healthcare centres is inadequate, forcing people to spend out of their pockets for private providers. Services provided in public hospital costs a fraction of the private hospitals but still patients prefer private hospitals because of the dismal sanitary condition, long waiting times, rude behaviour of staff, high infection rates and substandard clinical care at public hospitals. The lack of good administration and management, inefficient use of scarce resources and deficiencies in the quality of services create difficulties in accessing the public hospitals. Expensive drugs also add to the burden of this expenditure. As a result, many families slip below the poverty line. Though urban India has both public and private care centres, all are not affordable. In rural India, people have difficulty in accessibility and affordability of healthcare. Indian healthcare, on one hand, has world class hospitals, state-of-the-art-technologies, qualified professionals and surgeons and on the other hand, the average patient faces problems like accessibility, high cost treatments and inconsistent quality. India today faces the double burden of diseases where its urban areas have to deal with the increasing incidence of lifestyle diseases (non-communicable diseases) while the urban poor and rural India have to tackle the threat of communicable diseases and infectious diseases. Further, the population growth rate of India has steadily gone down. The population aged above 60 years is projected to grow around 193 million. This change in the population pyramid will fuel the demand for healthcare, particularly because of lifestyle diseases.

Learning lessons

Analysing the healthcare scenarios in different countries, we observe that nations spending the most on healthcare and those which spend less on healthcare face the problem of either accessibility or affordability or both. One of the major concerns is the increase in the ageing population. Most of the countries have the same trend, increase of elderly population. According to the WHO, the world population over 60 years will double from 11 per cent to 22 per cent between 2000 and 20506. Due to this, more people suffer from chronic and expensive-to-treat diseases. This, along with technological advances, will cause healthcare costs to continuously rise. Moreover, the healthcare professionals are also ageing. The healthcare industry will very soon face even more shortage of manpower (primary care physicians, nurses, surgeons). The mismatch between supply and demand will result in inefficient systems leading to high cost, long waiting times, improper staff utilisation (which adds to the cost) and patient dissatisfaction. Patient satisfaction has become an important parameter of quality management in hospitals. The increasing cost in healthcare is not only because of the technology used in treatment but also because of operational costs. To minimise the equipment costs, a trend of designing a low cost device has been already initiated. Along with this, are there any other way to reduce the cost?

Successful healthcare models

The greatest challenge for healthcare in the West is affordability whereas in India it is both affordability and accessibility. A few philanthropists contribute to healthcare in India with their models, which make it accessible and affordable. One example is Aravind Eye Hospital (AEH) in Madurai, Tamil Nadu, India started in 1976 by Dr Govindappa Venkataswamy. AEH is one of the largest providers of eye care services and trainer of eye care personnel in the world with 1500 beds. It is inspired by McDonalds, the fast food chain which focuses on continuously improving and standardising their service processes and thus engineering and managing their company as an integrated system. AEH gradually shifted to become the Aravind Eye Care System. One unique quality of the hospital, that sets it apart from the other eye hospitals in India and the world, is that more 50 per cent of patients are treated free of cost yet the system is financially self-sustaining. Overall number surgeries conducted by AEH are 349,274 and on average its surgeons conduct 2000 operations/year (Source: AEH report 2011-2012). Aravind eye care model is a great case study on multiple areas like: strategy, marketing, design thinking, leadership and operations. AEH is studied as a model in B-schools like Harvard, Stanford, Michigan, IMD –Lausanne and IIMs. It provides quality care at minimum costs because of their high level operational efficiency by managing the resources effectively7-10.

Another example is Narayana Hrudayalaya (NH) in Bangalore, a multi-speciality hospital with the concept of a health city which means ‘one point for all healthcare needs.’ It was established by renowned cardiac surgeon, Dr Devi Shetty in 2001. This tertiary care hospital performs over 4,000 surgeries a year (approximately half on paediatric patients). It has a vision of ‘affordable quality healthcare for the masses worldwide’ and a mission of ‘making quality healthcare accessible to the masses worldwide’. NH has a vision to constantly improve their system towards a lean operations system, which aims to drive down unit costs through a high-volume standardised strategy. Its approach is towards providing affordable, quality healthcare for the poor through a combination of compassion, high-quality medical knowledge and skills, and an astute sense of making the business work for the poor. It continuously works on capacity utilisation and staff productivity, technological innovations and staff training. The higher patient volume helps to streamline the organisation’s workflows and processes as well as build systems with better efficiency and cost–effectiveness. NH has launched a micro insurance scheme for farmers called Yeshaswini and founded ‘Arogya Raksha Yojana’, to provide free OPD consultation, cashless surgical facility, and diagnostics at discounted rates.

The way forward

AEH and NH are clear examples that innovation in the operation and process management can achieve a lot more than just innovation in medical technology. Healthcare is not limited to the disease and its treatment but extends to quality of care and patient satisfaction. To achieve quality care, the hospitals need to standardise their processes. They should be designed to deliver the desired outcome (target) as well as achieve cost effectiveness, value for money and quality improvement11,12. Along with standardisation, its integration with operations and process management is also important.

The major problems in healthcare efficiency are uncertainty, inflexibility and complexity. Uncertainty results from mismatch in the demand and supply. Inflexibility is concerned with technical, economical and staff adaptability. Complexity refers to medical processes and their co-ordination. Efforts should be to make healthcare accessible and affordable to the base of the pyramid (BoP) of the population, yet sustainable. The demand for effective and efficient healthcare is a challenge which needs to be addressed quickly and the increasing demand should be met with adequate supply (healthcare providers). Therefore, we need a healthcare system which is accessible to the BoP, made affordable and redesigned for the end user (target costing), by utilising the operations management of TPS principles13 to increase system efficiency.

This can be achieved by matching the demand with supply for which operations management becomes a necessity. The traditional healthcare management is based on past experience, feelings, intuition, educated guesses, linear projections and calculations based on the average values of input variables. What we need is evidence-based management where the healthcare system is really managed as a system and so are hospitals. Hospitals can often best be described as archipelagos. The ways in which the hospitals are organised add uncertainty and variability in supply and demand (on top of the ‘natural’ variability and uncertainty of demand). To increase both efficiency and quality, a system perspective of management towards the hospital will prove vital for the future.

To achieve efficiency in the hospital, effective management is necessary. Efficiency cannot be achieved by an individual, only as a team in hospitals. The hospitals can become efficient by co-ordination, controlled decisions and planning as well as management of workflows. The problem of healthcare efficiency will keep growing with healthcare challenges. Therefore, it needs to be dealt quickly in the bigger interest of patients and the society. Efficiency is achieved by making the hospitals flexible. Sometimes, the smallest of changes may improve efficiency considerably.

The workflows in the hospital need to be optimised to remove unnecessary, non-value adding tasks. These are the patient waiting for doctors or tests, doctor waiting for patient and test results, etc. the reduction of such wastes in the hospital will reduce the operational overhead cost. The TPS principle works towards system optimisation by eliminating wastes which are generated within the system.

Can our hospitals be transformed according to the TPS system? Can the major problem of variability and uncertainty be captured and optimised by this principle?

This can be accomplished by redesigning and standardising the workflow process through the utilisation of IT and TPS principles in healthcare. This will reduce the waiting time, increase staff/equipment utilisation, improve efficiency and also contribute towards reduction of costs. So it’s time for hospitals to become efficient and effective.

The study of different healthcare systems around the world shows that spending more money on healthcare does not necessarily result in an efficient healthcare system which is accessible and affordable. But, we need a healthcare system which is affordable, accessible and hence sustainable. The AEH and NH are the examples of this.

Now it is time for our hospitals to take a leap from traditional management towards smart, innovative, sustainable and patient centred management.

References:
1. http://data.worldbank.org
2. “Out-of-Pocket Spending in the Last Five Years of Life” Journal of General Internal Medicine, February 2013, Volume 28, Issue 2, pp. 304–09
3. http://www.forbes.com/2009/09/02/healthcare-spending-europe-business-healthcare-gdp.html
4. http://online.wsj.com/news/articles/SB10001424052748704893604576200724221948728
5. Ageing in the European Union-The Lancet
6. http://www.who.int/ageing/about/facts/en/index.html
7. Dr.Bhupinder Chaudhary, Dr.Ashwin G. Modi and Dr.Kalyan Reddy, “Right To Sight: A Management Case Study On Aravind Eye Hospitals”, ZENITH International Journal of Multidisciplinary Research Vol.2 Issue 1, January 2012, ISSN 2231 5780
8. Dr. Rani GeethaPriyadarshini , “A Case Study on Aravind Eye Care Systems”, November 6, 2011 School of Business, Coimbatore
9. “Aravind Eye Hospitals: A Case in Social Entrepreneurship” – IBS case development centre, Asia-Pacific’s Largest Repository of Management Case Studies. ibscdc.org/Case_Studies/Entrepreneurship/…/Aravind Eye Hospitals-Case Study.htm1
10. Pavithra K. Mehta And SuchitraShenoy, “Infinite Vision – How Aravind Became The Greatest Business Case for Compassion”, ”, Berrett-Koehler Publishers, Inc. San Franciso, a BK Business book infinitevision.pdf
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12. Merode, F.v., A prelude of the 2004 Antwerp Quality Conference: Targets and target values—integrating quality management and costing. Accreditation and Quality Assurance: Journal for Quality, Comparability and Reliability in Chemical Measurement, 2004. 9(3): p. 168-171
13. Liker, J.K., The Toyota Way: 14 Management Principles from the World’s Greatest Manufacturer. 2004, New York: McGraw-Hill. 330