2018 Global health care outlook - The evolution of smart health care - Deloitte

2018 Global health care outlook
The evolution of smart health care
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                                                          2018 Global health care outlook l The evolution of smart health care

Overview and outlook                                                                        03
What exactly does smart health care look like?                                              04
Global health care sector issues in 2018                                                    07
Strategically moving from volume to value                                                   11
Responding to health policy and complex regulations                                         16
Investing in exponential technologies to reduce costs, increase
access, and improve care                                                                    18
Engaging with consumers and improving the patient experience                                22
Shaping the workforce of the future                                                         25
Appendix                                                                                    27
Endnotes                                                                                    28
Contacts                                                                                    31

2018 Global health care outlook l The evolution of smart health care

and outlook
With quality, outcomes, and value the watchwords for health care in
the 21st century, sector stakeholders around the globe are looking for
innovative, cost-effective ways to deliver patient-centered, technology-
enabled “smart” health care, both inside and outside hospital walls.

What exactly does
smart health care
look like?
Appropriate treatments are delivered at the appropriate time, in the
appropriate place, for the appropriate patient

Clinicians use technology to more accurately diagnose and treat illness
and deliver care

All care delivery stakeholders across the ecosystem effectively and
efficiently communicate and use information

Patient data is in one, easily accessible place

The correct individuals do the correct work (e.g., nurses handle patient
care, not administrative tasks)

Patients are informed and actively involved in their treatment plan

New, cost-effective delivery models bring health care to places and
people that don’t have it

Efficiency improves; waste declines

2018 Global health care outlook l The evolution of smart health care

Evolving policies, processes, and capabilities          home and outpatient ambulatory facilities.     systems. Clinicians may, therefore, have
to deliver smart health care will not be                Members of the health care delivery chain      difficulty coordinating appointments and
easy, given global health care’s magnitude              often work in multiple locations (hospital,    procedures, sharing test results, and
and complexity. For example, there could                doctor’s office, retail medical clinic,
                                                                                                       involving patients in their treatment plan. In
be significant logistical and technology                diagnostics lab). Patients may reside in a
obstacles to overcome. More and more                    city or even a country away from their care    other words, care providers may be working
inpatient services are being pushed to                  providers. And health records frequently       hard but they are not necessarily working
non-traditional care settings such as the               reside in different formats and on disparate   “smart.”

                                      Global health care spending is projected to increase at an annual rate of 4.1% in 2017-2021, up
                                      from just 1.3% in 2012-2016. Aging and increasing populations, developing market expansion,
                                      advances in medical treatments, and rising labor costs will drive spending growth.1

                                                                Per-person health care spending will continue to vary widely, ranging from
                                                                $11,356 in the United States to just $53 in Pakistan in 2021.2

          Life expectancy is estimated to increase by more than a full year between 2016 and 2021—from 73 to 74.1 years—
          bringing the number of people aged over 65 to more than 656 million, or 11.5% of the total population. Much of
          the gain in life expectancy globally is due to falling infant mortality rates.3

          Although the battle against communicable diseases is far from over, countries are making headway through improved
          sanitation, better living conditions, and wider access to health care and vaccinations. The estimated number of malaria deaths
          worldwide fell to 429,000 in 2015, down from nearly 1 million in 2000. 4 The number of AIDS-related deaths dropped
          from 2.3 million in 2005 to an estimated 1.1 million in 2015, due largely to the successful rollout of treatment.5

          Rapid urbanization, sedentary lifestyles, changing diets, and rising obesity levels are fueling an increase in chronic
          diseases—most prominently, cancer, heart disease, and diabetes—even in developing markets.6 China and India have
          the largest number of diabetes sufferers in the world, at around 114 million and 69 million, respectively.
          Globally, the number is expected to rise from the current 415 million to 642 million by 2040.7

          Someone develops dementia every three seconds. In 2017, an estimated 50 million
          people worldwide live with dementia­—a number that is predicted to double every 20 years. 8
          By 2018, dementia will become a trillion-dollar disease.9

2018 Global health care outlook l The evolution of smart health care

Independently and collectively, health care stakeholders in 2018 are likely to face a number of existing and emerging issues in their quest to get
“smarter” (Figure 1):

•   Creating a positive margin in an uncertain and changing health economy
•   Strategically moving from volume to value
•   Responding to health policy and complex regulations
•   Investing in exponential technologies to reduce costs, increase access, and improve care
•   Engaging with consumers and improving the patient experience
•   Shaping the workforce of the future

This 2018 outlook reviews the current state of the global health care sector; explores trends and issues impacting health care providers,
governments, other payers, and patients; and suggests considerations for stakeholders as they seek to deliver high-quality, cost-efficient,
smart health care.

Figure 1. Key issues in global health care

                                                                                               Creating a
                                           Shaping the                                      positive margin in
                                          workforce of the                                  an uncertain and
                                              future                                         changing health

                     Engaging with
                    consumers and                         Top challenges facing                                  Responding to health
                                                                                                                  policy and complex
                  improving the patient
                       experience                        health care stakeholders                                      regulations

                                                                                               Investing in
                                        Strategically moving                                technologies to
                                          from volume to                                 reduce costs, increase
                                                value                                          access, and
                                                                                              improve care

2018 Global health care outlook l The evolution of smart health care

Global health care
sector issues in 2018
Creating a positive margin in an uncertain and changing health economy

Improving financial performance and                                demand, funding limitations, infrastructure                     As has been the case for the past several
operating margins is likely to remain a                            upgrades, and therapeutic and technology                        years, spending is expected to be driven
top issue. Many public and private health                          advancements strain already limited financial                   by aging and growing populations,
systems have been experiencing revenue                             resources. Combined health care spending                        developing market expansion, clinical and
pressure, rising costs, and stagnating or                          in the world’s major regions is expected to                     technology advances, and rising labor costs
declining margins for years. The trend                             reach USD $8.7 trillion by 2020, up from USD                    (exacerbated by many markets’ competition
is expected to persist, as increasing                              $7 trillion in 201510 (Figure 2).                               for health care workers).11

Figure 2. Health care spending, 2015 - 2020

                                                                                                                                        CAGR (2015 - 2020)

                        Global                                                                                                                        4.3%

             North America                                                       4,083.6

           Western Europe                                                                                                                             4%

         Asia & Australasia                                                                                                                           5%

              Latin America                                                                                                                           2.4%

      Middle East & Africa                                                                                                                            4.2%

    Transition economies                                                                                                                              7.5%

                                   0                     2,000                    4,000                    6,000                8,000               10,000

                                                                 USD $ billion                      2020 (P) 2015

Source: World Industry Outlook, Healtcare and Pharmaceuticals, The Economic Intelligence Unit, June 2017

2018 Global health care outlook l The evolution of smart health care

Health care spending by country varies widely (Figure 3). Unfortunately, higher spending levels don’t always produce better health
outcomes and value. For example, the United States, at 16.9 percent of GDP in 2016, continues to spend considerably more on health
care than comparable countries but it is in the lower half of the Organization for Economic Cooperation and Development (OECD)
countries’ life expectancy rankings.12 US health spending now exceeds USD $3 trillion per year, with growth rates projected to accelerate
through 2024. Major spending categories are led by hospital care (USD $1 trillion), physicians (USD $634.9 billion), and prescription drugs
(USD $328.6 billion).13

Figure 3. Health care spending by country

                    Health care expenditures as a share of GDP, 2016





               12                   11.5
                                                  11.2 11.1 11.1
                                                                              11      10.8 10.6
                                                                                                10.4 10.4
                                                                                                                                  10.1 9.9
               10                                                                                                                                     9.8             9.6
                                                                                                                                                                                 9.4          9.4       9.3         9.1     9       8.9        8.8       8.4
                8                                                                                                                                                                                                                                                                     7.5
                                                                                                                                                                                                                                                                                                               7.2      7.2
                                                                                                                                                                                                                                                                                                                                        7              7
                                                                                                                                                                                                                                                                                                                                                                6.3      6.3
                6                                                                                                                                                                                                                                                                                                                                                                  5.2



                    United States
                                                                                                                                                    United Kingdom
                                                                                                                                                                               New Zealand

                                                                                                                                                                                                                                                                                    Czech Republic

                                                                                                                                                                                                                                                                                                                                   Slovak Republic

Source: OECD

Populations, therapeutics, and infrastructure drive spending

There are various views as to the drivers of                                                                                doctors and patients are prompting more                                                                                                         health costs.16 In addition, health systems
health care spending. In developed markets,                                                                                 (and more costly) tests and interventions                                                                                                       are dealing with the ongoing challenges of
it’s expected that aging populations will                                                                                   for chronic and communicable diseases.                                                                                                          containing and treating both communicable
continue to be a major factor—especially in                                                                                 Providers, payers, and life sciences                                                                                                            and chronic diseases. Once a hallmark
Japan, where the share of people over age                                                                                   companies may have to balance the                                                                                                               of developed markets, chronic diseases
65 will reach almost 30 percent by 2021, and                                                                                development and adoption of new therapies                                                                                                       (diabetes, chronic heart disease, Alzheimer’s
in Western Europe, with its share nearing                                                                                   and medical technologies with their potential                                                                                                   disease) exacerbated by lifestyle risks are
21 percent.14 Changing patterns of care,                                                                                    quality, experience, and health outcomes. In                                                                                                    becoming a shared health and cost issue.17
including increased visits and higher-quality                                                                               developing markets, growing populations, an
services, could also be major cost-drivers.15                                                                               increase in higher-income households, and
Therapeutic advances and the desires of                                                                                     rising consumer expectations are pushing up
2018 Global health care outlook l The evolution of smart health care

Adding to the cost equation, many health                  percent surcharge to the cost of drugs.         alternatives to contract labor; and revisiting
systems are struggling to update aging                    Some hospitals derived as much as 40            revenue cycle strategies, such as leveraging
infrastructure and legacy technologies with               percent of their revenues from drug             new technologies and analytics tools that
already limited capital resources.                        sales—which could account for their             help improve processes and coding to
                                                          entire profit margin.21 In 2009, the Chinese    reduce claims denials.25
As health care costs increase, affordability              government passed the Zero-Markup Drug
and insurance coverage remain problematic.                Policy, to rein in out-of-control drug costs,   Particularly in the United States, hospitals
In the United States, deductible cost                     curb over prescribing, and reduce the           and health systems are engaging in mergers
increases are far outpacing increases in                  financial burden to the public, especially      and acquisitions (M&A) and other partnering
costs covered by insurance.18 Brazil’s private            those in low-income settings. The policy        schemes to achieve economies of scale.
health insurance sector lost 2.5 million                  went nationwide in 2015 and hospital            Provider organizations are working to
beneficiaries between 2014 and 2016 due                   margins have been falling as a result.22        increase their physician networks, expand
to the country’s high unemployment rate.                                                                  their geographic reach, and diversify their
                                                        •• In Brazil, profit margins for private health
Added to that, companies in Brazil had to cut                                                             specialized offerings and talent. Growth
                                                           care providers have become less attractive
expenses, and changing their employees’                                                                   via M&A could provide several benefits,
                                                           following a ruling by the high court,
health insurance plan to a cheaper one was                                                                including increased access to capital, which
                                                           Supremo Tribunal Federal, that these
a popular option.19                                                                                       could mean more money to invest in facilities,
                                                           providers are to reimburse the Brazilian
                                                                                                          technologies, and staff.26
                                                           public health care system (Sistema Único
Sector stakeholders’ efforts to manage rising
                                                           de Saúde, or SUS) in the same way that
costs are complicated by price controls,                                                                  In another example, large medical groups
                                                           private hospitals are currently reimbursed
reduced funding, and misaligned incentives                                                                in China are trying to form a “closed-loop”
                                                           for treating privately insured patients.23
(e.g., the longstanding fee-for-service                                                                   supply chain by acquiring hospitals. CR
payment model). For example:                            •• Many hospitals in India are discovering        Healthcare currently manages 109 hospitals
                                                           they need to build more financially sound      with more than 11,000 beds, while sister
•• The United Kingdom’s National Health
                                                           operating models to offset diminishing         company CR Pharmaceuticals supplies
   Service (NHS) is currently experiencing the
                                                           margins due to price controls on drugs,        the hospitals’ drugs. Chinese insurance
   longest slowdown in funding in its history.
                                                           consumables, and medical devices, and          companies are also using similar business
   While all four nations (England, Scotland,
                                                           due to insurance companies’ use of             models to promote commercial medical
   Wales, and Northern Ireland) share many
                                                           growing patient share and buying power         insurance.27
   of the same challenges, the demand and
                                                           to squeeze hospital pricing. In addition,
   financial sustainability issues appear most
                                                           India’s medical workforce shortage means       In April 2017, Japan’s government began
   acute in England. Between 2010-2011 and
                                                           available doctors command a high price         allowing medical corporations to create
   2015-2016, NHS funding growth slowed
                                                           structure, further eating into hospital        nonprofit holding companies without
   significantly, averaging 1.2 percent per
                                                           margins.                                       corporate acquisitions as a way to promote
   year (in real terms), and is set to average
                                                                                                          organizational change. Under the scheme,
   1.1 percent from 2016-2017 until 2020-
                                                        Consolidating and collaborating                   a holding company can manage several
   2021, compared to the long-term average              to compete                                        medical institutions/nursing care facilities in
   of nearly 4 percent a year since the NHS             Health care providers are employing a             the region. This may be especially effective for
   was established.20 While the first few               variety of strategies to combat shrinking         medical institutions in rural areas that need
   years of the United Kingdom’s response               margins and rising costs. Case in point:          to increase operational efficiency despite
   to the global financial crisis provided              Rather than being paid more to increase           declining patient populations.
   an opportunity to improve efficiency                 inpatient volume to generate revenue,
   of services, the last two years have                 many health systems are responding to             Joint ventures, public-private partnerships
   seen NHS providers struggling to break               new financial incentives to treat patients        (PPPs), and other collaborative arrangements
   even. Meanwhile, a growing and aging                 outside traditional hospital settings. To         are taking place within and across health care
   population, changing patient expectations,           illustrate the impact, the proportion of          sectors and geographies.
   and pressure on social care and public               revenue from inpatient services relative          Governments, providers, employers, and
   health budgets are increasing demands on             to outpatient services in US hospitals has        insurers are developing wellness programs
   NHS services.                                        fallen 10 percentage points since 2004.24         to aid public health efforts. Hospitals are
•• China’s policy of “zero markups” for drugs           Among other margin-enhancing strategies           cooperating with biotech companies to
   sold at hospitals is a major contributor             are combining traditional workforce               develop personalized therapies, especially for
   to eroding profit margins. For more than             planning with predictive analytics to             cancers.
   20 years, hospitals were able to add a 15            improve efficiencies in labor costs and find

2018 Global health care outlook l The evolution of smart health care

Large conglomerates                                 (e.g., services for international patients
                                                    traveling abroad for care), and launching new
are entering Southeast                              companies and philanthropic organizations—
Asia (SEA) and expanding                            all to come up with an alternative revenue
                                                    stream to subsidize government or improve
laterally between life                              the bottom line.28
sciences and health                                 Respondents to Deloitte’s 2017 survey
care through M&A and                                of US health care CEOs had the following
                                                    suggestions for producing and sustaining
joint ventures (JVs),                               positive margins in an uncertain and changing
and traditional medical                             health economy:

technology (medtech)                                •• Increase system efficiencies beyond
                                                       what is needed to be profitable.
companies are moving                                   Many hospitals and health systems have
into care provision. And,                              reduced costs and increased efficiencies
                                                       at the margins of their organizations, but
nontraditional players like                            long-term sustainability may require a
technology companies                                   fundamental transformation of the way that
                                                       services are organized and delivered.
and other disruptors are
                                                    •• Operate as a consolidated system.
entering the health care                               Many health systems have grown through
market and providing                                   acquisition, and have not fully realized new
                                                       efficiencies and synergies system-wide.
innovative perspectives.                               Consolidating where appropriate and
                                                       looking for synergies across the system can
Considerable opportunities exist for health            improve efficiency.
care players to work collaboratively on
innovative access, delivery, and financing          •• Diversify beyond the core hospital.
models to reduce health care costs and                 As inpatient revenues decline, many CEOs
increase quality.                                      are partnering or integrating physician
                                                       practices, as well as investing in outpatient
Stakeholder considerations                             services, step-down care, urgent care, etc.
While reducing costs has long been a way for        •• Improve revenue cycle systems. Despite
health care organizations to offset shrinking          upgrades to revenue cycle systems in
margins, many are pursuing new cost-cutting            recent years, many health systems are
measures, such as developing alternative               still leaving money on the table. They may
staffing models, shifting patients to outpatient       be able to leverage scale and improve
services, and reducing administrative and              efficiency by reducing the number of supply
supply costs. In addition, health systems are          chain vendors and noncritical employees.29
exploring new revenue sources. Some, for
example, are looking to capitalize on their
intellectual property (IP) by working with
employees to develop innovations including
medical devices, training videos, health
information technology (HIT) tools, or patient
safety solutions.
Once the hospital has filed for patent or
copyright protections, it can sell or license the
IP to other industry stakeholders. Hospitals
and health systems are also investing in
JVs, commercializing their foreign assets

2018 Global health care outlook l The evolution of smart health care

Strategically moving
from volume to value
Health care is continuing its transition from fee-for-service (FFS) reimbursement to outcomes
- and value-based payment models (Figure 4):

Figure 4. A continued shift from volume to value

                                                                              • Focus on maximizing value (lower cost
                                                                                and higher quality) of health care delivered
                  Volume                                                        through alignment of incentives and
                                                                                management of risk
                 • Payment systems based on
                   fee-for-service; limited financial risk                     • Care coordination driven by standardized
                                                                                protocols; use of information technology for
                 • Providers have incentives to increase                        information sharing
                   payment rates, specialization/intensity,
                   and volume; fragmentation of providers                     • Investment into supporting clinical integration,
                   (”silos”)                                                    population health, and other cost
                                                                                reduction/revenue enhancement
                 • Limited focus on outcomes and                                opportunities to respond to new payment
                   information sharing                                          systems and grow market share

In the United States, the shift toward value is         Other countries are also moving from            treatments, as well as assistance with social
being accelerated by the Medicare Access and            volume to value through reform policies         needs.30 Mexico’s CASALUD primary care
CHIP Reauthorization Act of 2015 (MACRA),               and programs promoting operational              delivery model deploys innovative medical
which offers significant financial incentives           efficiency, technology use, population health   technologies that better engage patients
for health care professionals to participate            management, and wellness. For example, the      and health care professionals.31 One such
in risk-bearing, coordinated care models                Connecting to Care program in Saskatchewan,     application is the MIDO® Mobile Module
and to move away from the traditional FFS               Canada, uses proactive outreach to prevent      Cart, an all-in-one, self-contained system
system. MACRA is poised to drive increased              hospitalizations and emergency room             (and standardized training) that facilitates a
participation in risk-bearing models across all         (ER) visits by focusing on timely use of        proactive approach to disease detection and
payers, not just Medicare.                              community-based services, including support     offers promise in preventing or slowing the
                                                        for medical, mental health, and addiction       rate of disease progression.32

2018 Global health care outlook l The evolution of smart health care

Japan’s government has introduced a series     “beyond quality to value,” and “beyond             The Unite Kingdom’s 2015 NHS Five Year
of reform initiatives, the most symbolic       health care to health.”34 The MOH is focusing      Forward View sets a clear course of action
being the establishment of an Integrated       its productivity improvement projects              to 2020: While the NHS is already one of the
Community Care System that combines            in four areas to deliver quality care and          leanest publicly funded health services in
health care, long-term care, housing, and      better value: helping patients navigate            the industrialized world, opportunities to go
livelihood support services in a unified       the health care system more efficiently            further faster are detailed in the NHS’s Ten
manner so that Japan’s elderly can receive     without compromising quality of care;              Point Efficiency Plan. The NHS is also seeking
continuous quality care in their local         automating labor-intensive activities to           to leverage the potential of technology and
communities33 versus the hospital.             increase operational efficiency; streamlining      innovation more effectively, empowering
                                               workflows, expanding job roles, and upskilling     patients to take a more active role in their
The Singapore Ministry of Health (MOH)         health care staff to work more effectively and     own health and care while also enabling NHS
has categorized the nation’s top health care   productively, and meet the needs of patients       staff and their care colleagues to do their
reform issues and trends into three broad      more holistically; and empowering patients,        jobs more efficiently.
shifts referred to as the “3 beyonds”—moving   caregivers, and volunteers to self-serve and
“beyond the hospital to the community,”        self-care.

    Untangling the knotty problem of low-value health care
    Wasted spending on low-value health care—services that offer little or no expected benefit or that are inefficiently
    delivered—can total billions of dollars a year. The Institute of Medicine (IOM) calculated that roughly $765 billion
    of US medical spending in 2009 was wasted on unnecessary services, excessive administrative costs, fraud, and
    other problems.35

    Programs such as the ABIM Foundation’s Choosing Wisely Initiative36 (the European Federation of Internal Medicine
    has also launched its own Choosing Wisely campaign),37 which seeks to advance a national dialogue on avoiding
    wasteful or unnecessary medical tests, treatments, and procedures, aim to reduce low-value health care services,
    but it’s a knotty problem to untangle. Generally, there is a lack of consensus on how to incorporate clinical nuance,
    patient preferences and priorities, and cost-benefit tradeoffs in provider and consumer-facing initiatives to reduce
    low-value care.38 Also, evidence is lacking for best practices to operationalize programs and emerging technologies
    to reduce unnecessary and inefficient care.

    According to IOM, incremental upgrades and changes by individual hospitals or health systems will not be enough.
    Achieving high-value care, reducing waste, and lowering costs could require an across-the-board commitment to
    develop a “learning” health care system that continuously improves by capturing and sharing lessons from every
    care experience and research discovery. Stakeholders should consider strategies that include adopting value-
    and outcomes-based payment models; embracing new technologies to collect and analyze data at the point of
    care; engaging patients and their families; and establishing better teamwork and transparency within and across

2018 Global health care outlook l The evolution of smart health care

Population health management and                        The goals of population health management          Encouraged and incentivized by employers,
wellness                                                are critical: improving clinical effectiveness,    health care practitioners, and even
Sector stakeholders, particularly in advanced           lowering costs, sharing accountability,            governments, more and more consumers
health systems, are advocating the shift                enhancing safety and, most importantly,            are taking their health and wellness into
from a “break-fix” model of health care to              keeping an entire population healthier.            their own hands. In an evolution to what
one focused on prevention and the overall               But striving to achieve these goals is             Deloitte calls an informed and empowered
holistic health of populations rather than              both challenging and complex. Countries’           “quantified self,” consumer engagement in
episodic and transaction-based treatments.              population health efforts range from minimal       and expectations of health care are growing,
                                                        to robust and are as diverse as combating          especially as individuals become better
                                                        opioid addiction to planning future care for       informed about their genetic profile, the
Population health— health                               aging citizens.                                    diseases they have and might develop, and
policy for specified groups,                            •• The opioid crisis plaguing many nations
                                                                                                           the effectiveness of health interventions.
                                                                                                           They are embracing prevention and devoting
from prevention to diagnosis                               is inciting widespread action by health
                                                                                                           time, energy, and money to staying healthy,
                                                           systems, insurers, families, communities,
and treatment of chronic                                   and all levels of government. Initiatives
                                                                                                           including using regulated and validated
                                                                                                           health applications (apps) and wearables.43
disease—takes a broad                                      include more funding for interventional
                                                           programs to reduce overdoses, increased
look at the management of                                  efforts to integrate health and social
                                                                                                           One indication of the emerging “quantified
                                                                                                           self” is the increasing popularity of mobile
outcomes for all of a health                               care to support vulnerable populations
                                                                                                           communication devices for health services
                                                           being impacted by opioids, and enhanced
system’s patients, including                               support for recognizing and treating
                                                                                                           and information.44 From wearable fitness
                                                                                                           trackers to smart devices to cyber networks,
efforts to use health care                                 mental health issues and addictions.
                                                                                                           the mHealth market has doubled in just four
resources effectively and                               •• In July 2016, Japan’s government released       years.45 In fact, there are more than 100,000
                                                           the “Asia Human Well-Being Initiative,”         mHealth apps currently available,46 and
efficiently to improve the                                 which aims to apply aspects of the              health app market revenue was projected to
lifetime health and well-being                             Japanese health care/nursing care system        grow to USD $26 billion by the end of 2017.47
                                                           in other aging Asian countries. With the        While these devices and services encourage
of a specific population.40                                initiative, it is expected that Japanese        consumers to be engaged participants in
                                                           providers will expand their overseas            managing their own health, fitness, and
Activities include promoting health and well-              footprint, especially in Asian countries that   general wellness, broader benefits may
being; primary, secondary, tertiary care; and              are facing rapidly aging societies.             be reaped as well. From the perspective
disease prevention.                                                                                        of population health, where 75 percent of
                                                        •• Some Southeast Asian nations are
                                                                                                           all health costs derive from preventable
                                                           taking a holistic approach to addressing
Population health requires data and                                                                        conditions,48 feedback devices like these
                                                           current and future health care needs
analytics to identify at-risk patients and                                                                 could be enormously helpful in facilitating
                                                           with initiatives designed to expand care
target services that reduce their use of                                                                   healthy behavior change.49
                                                           options (e.g., home and community-based
expensive and low-quality care. Under a
                                                           care, long-term care, virtual care), increase
population health model, providers manage
                                                           access, reduce costs, and empower
care—from preventive and maintenance
care to acute and long-term care—for a
defined population.                                     •• In late 2016, China’s National Health and
                                                           Family Planning Commission (NHFPC)
Those who are most successful often deploy                 announced “Healthy China 2030,”
innovative delivery models; analyzing data                 the country’s first long-term strategic
and trends in a population’s health, quality,              population health plan. The plan aims to
and costs, and bearing financial risk. Value-              grow investments in the “Big Health” sector
based payment contracts reward providers                   to 16 trillion RMB by 2030.42
for successfully executing these processes.41

2018 Global health care outlook l The evolution of smart health care

Combining the power of analytics and mHealth devices, wearables, and other nontraditional sources of data collection could add even more
value to wellness programs by helping to identify new care pathways and high-risk individuals.50 Unfortunately, lack of interoperability among
devices currently limits big data’s promise and, by extension, overall wellness and prevention initiatives. Interoperability has the potential to
decrease costs51 and improve care coordination.52 With the advent of more open systems, data sharing should improve53 and analytics use

Social determinants’ impact on health care
Health care stakeholders have long recognized that factors outside the system—the social determinants of health—influence an individual’s
health and well-being (see sidebar). Health-related social needs have been shown to affect individuals’ health outcomes to a large extent.54

            The social determinants of health
            Health-related social needs generally refer to factors that affect health outside of the health care system
            and that are beyond an individual’s control.55 Typical categories include:

            Housing instability/homelessness: e.g., having                                 Interpersonal violence: Being exposed to
            difficulty paying rent or affording a stable place                             intentional use of physical force or power,
            of one’s own, living in overcrowded or run-down                                threatened or actual, that results in or has
            conditions                                                                     a high likelihood of resulting in injury, death,
                                                                                           psychological harm, etc.
            Food insecurity (hunger and nutrition): Not
            having reliable access to enough affordable,
                                                                                           Family and social supports: Not having
            nutritious food
                                                                                           relationships that provide interaction, nurturing,
            Transportation: Not having affordable and                                      and help in coping with daily life
            reliable ways to get to medical appointments or
                                                                                           Employment and income:
            purchase healthy foods
                                                                                           Not having the ability to get or keep a job, or gain
            Education: Not having access to high school                                    steady income
            or other training that might help someone gain
            consistent employment

            Utility needs: Not being able to regularly pay
            utility bills (e.g., electricity, gas, water, phone) and/
            or afford necessary maintenance or repairs

            Source: Social determinants of health: How are hospitals and health
            systems investing in and addressing social needs? Deloitte Center for Health
            Solutions, 2017

2018 Global health care outlook l The evolution of smart health care

Across all developed countries, “vulnerable”            There are amazing programs and                   And while addressing social determinants
or “troubled families,”—defined as those                innovations being developed and                  is still outside the core of health care,64 the
that are in contact with several departments            implemented right now, but efforts are           shift to value is spurring more investment
of the local authority including the child              fragmented, incremental, and there’s no          and activity around addressing social
or youth welfare system—are a growing                   blueprint.61 Hospitals often lack dedicated      needs. Taking a holistic system and life
concern. These families rarely succeed                  funds for all of the populations they want       cycle approach to address care inequalities
in breaking the negative spiral, which                  to target, and finding sustainable funding       and social needs can ease the burden
leads to persistent poverty, deprivation,               to address social needs can be difficult.        on vulnerable individuals, families, and
and transgenerational dependency                        Determining return-on-investment                 communities, and improve outcomes at all
on public support. Living in vulnerable                 (ROI) for social need activities is another      stages of life.65 There is also an economic
families accentuates the risks of poor life             challenge; it requires hospitals to identify     rationale for investing in the social
outcomes for those most dependent on                    meaningful measures, such as quantifiable        determinants of care: healthier individuals
family structures, especially children and              improvements in health outcomes and cost         contribute more to the economy, increasing
adolescents. The current failure to address             savings. Generally, hospitals that are further   government tax revenues and a country’s
the social determinants of health for these             along in the journey to value-based care         GDP.
vulnerable families is creating avoidable cost          report the largest investments and most
and social pressures on society.56                      activity around addressing social needs.
                                                        These organizations are also more likely to
Social determinants also can affect health              engage in public and private partnerships,
outcomes and payments for health systems.               employ innovative solutions, and measure
For example, while a top-rated hospital                 more aspects of their social needs activities,
might be highly effective at treating an acute          including health outcomes, cost outcomes,
health issue, the patient’s condition could             and patient experience.62
deteriorate when he returns home to an
unhealthy environment. Factors there—                   Stakeholder considerations
unstable housing situation, food insecurity,            The needle is moving from treatment to
violence in the patient’s home or personal              prevention as health care costs continue to
relationships, or others—may contribute to              escalate, and governments, health systems,
the patient’s eventual return to the hospital           health plans, and other stakeholders
for declining health, which can make it                 understand that it makes clinical and
difficult for the hospitals to receive incentives       financial sense to invest in keeping
and/or avoid financial penalties.57                     individuals and populations healthy. Value-
                                                        based payment models that reward health
Increasingly, hospitals and health systems              systems for improved quality and other
are working to navigate the challenges of               outcomes have the potential to improve
effectively linking community and clinical              outcomes and margins, and reduce total
services to improve health outcomes in                  costs of care.63
the long term. For instance, many hospitals
now screen for social needs, although some              However, a successful transition to value-
of this screening appears to be occasional              based care requires that stakeholders—
and ad hoc rather than consistent and                   including consumers—move beyond health
systematic.58 Some health systems employ                care to health; from treatment to prevention/
community health assistants (CHAs), non-                wellness; and from individual to population
licensed professionals who assess patients’             health. Already, providers are leveraging
needs, connect with primary care and                    technology advances to expand care beyond
case management teams, and coordinate                   brick and mortar locations by establishing
referrals.59 Other hospitals and medical                digitally enabled, integrated community care
providers are partnering with ride-hailing              systems.
services to overcome transportation

2018 Global health care outlook l The evolution of smart health care

Responding to health
policy and complex
Creating a positive margin in an
uncertain and changing health economy                   The new legislation is expected to drive        Three developments are helping health care
Growing health care market complexity leads             development and widespread promotion of         organizations mine insights from myriad
to more regulatory complexity and increases             a comprehensive medical database to aid         data sources:
the need for heightened stakeholder risk                research for drug discovery using artificial
                                                                                                        •• Cognitive computing. Turning the vast
management. And while health systems                    intelligence (AI) and other advances.
                                                                                                           volume of available health care data—from
worldwide share overarching health policy
                                                                                                           medical devices, smartphones, activity
and regulatory goals—ensuring quality care              United Kingdom—The tax-funded NHS
                                                                                                           trackers, electronic health records (EHRs),
and patient safety, mitigating fraud, and               operates within a very complex regulatory
                                                                                                           and more—into insights that enable
cyber threats—regions and countries are                 environment. England, for instance, has
                                                                                                           personalized medicine necessitates
grappling with their own specific challenges.           both a national financial (NHS Improvement)
                                                                                                           new aggregation, storage, and modeling
                                                        and quality (Care Quality Commission)
                                                                                                           approaches. Cognitive computing
Brazil—Brazil is experiencing a profound                regulator; they provide ongoing evaluation
                                                                                                           (machine learning, neural networks, deep
movement in its corporate management                    of performance against agreed-upon
                                                                                                           learning, etc.) is a common technique
culture, moral conscience, and ethical                  criteria and publish the findings. There are
                                                                                                           for dealing with large volumes of rapidly
action across all industries. In recent years,          also professional group regulators and all
                                                                                                           changing data. It allows for a variety of
there have been a number of corruption                  organizations have to comply with financial
                                                                                                           statistical algorithms, can involve a large
cases in Brazil, even in companies that                 and data protection regulations. While
                                                                                                           number of highly granular models, and
apparently had clear and well-established               fulfilling requests for data and information
                                                                                                           can quickly generate new models for new
compliance and other initiatives to mitigate            can be burdensome for health care
                                                                                                           data. It can be used to predict (disease
inappropriate conduct and practices. The                stakeholders, regulatory pressure is a facet
                                                                                                           onset, for example), detect patterns in
health sector was not immune to these                   of the larger financial, demand, and staffing
                                                                                                           data (a drug’s effects on populations or
cases. Several scandals have been widely                pressures under which the NHS operates.
                                                                                                           individuals, for example), or to classify
reported in the major press, especially in the
                                                                                                           populations (patient subpopulations, for
last three years, such as the so-called “Mafia          United States—Although significant
                                                                                                           example). Machine learning can also be
of Orthotics and Prosthetics.” 66                       legislative, industry, and public attention
                                                                                                           used to combine data across disparate
                                                        is heavily focused on the debate over the
                                                                                                           data sources—say, to create a Patient 360
China—The number of private hospitals in                future of the Affordable Care Act (ACA),
China surpassed public hospitals in 2015,67             health care stakeholders face other
prompting more regulatory supervision of                significant strategic and compliance            •• Cloud-based, interoperable electronic
the registration, drug management, medical              challenges related to government programs,         health records. Interoperable EHRs
environment, and physician certification                health care payment and delivery system            coupled with AI could create process
of private hospitals. Adding to the need                reforms, and new billing and coding                efficiencies and improve decision making
for oversight, the number of illegal private            requirements.                                      necessary to boost quality. Data could
medical institutions is also growing,                                                                      be better integrated into daily care, and
accompanied unfortunately, by an increase               Data management and security                       patients could play a role in curating
in medical negligence incidents.                        Digital health care (mobile health, wireless       their own data. The data could include
                                                        health, connected health, etc.) technology is      genetic, social, and behavioral patient
Japan—In May 2017, Japan introduced a                   delivering solutions to tackle the increasing      information, as well as financial, clinical, and
law establishing a standardized rule for                need for better diagnostics and more               administrative records. It could be securely
anonymously processing medical care                     personalized therapeutic tools.69 It also is       stored in the cloud and accessed on an
information.68 The law’s purpose is to                  creating challenges for governments, health        as-needed basis—perhaps on a blockchain
promote R&D and advanced medical studies.               systems, and insurers, which must collect,         (a distributed, immutable record ledger
                                                        analyze, and store more and more data.             of digital transactions that is shared and
                                                                                                           editable by various stakeholders).71
2018 Global health care outlook l The evolution of smart health care

•• Internet of Things (IoT). Development of         •• Who is responsible when the health care             Until recently, medical institutions in
   the IoT in the health care market (where it is      technology a consumer chooses to buy—a              Japan generally used closed systems
   also called the Internet of Medical Things, or      self-monitoring device, for example—                to help reduce cyber threats. However,
   IoMT) has been proving particularly valuable        produces faulty information and sends it to         implementation of the national health
   in remote clinical monitoring, chronic              the consumer’s primary care physician?              system’s new medical ID and data-sharing
   disease management, preventive care,                                                                    scheme will require medical institutions to
                                                    •• Who owns patient information and who is
   assisted living for the elderly, and fitness                                                            upload data to external servers, heightening
                                                       responsible for keeping it safe, especially
   monitoring. IoT’s application is lowering                                                               the importance of cybersecurity.
                                                       when it is shared across clinicians, facilities,
   costs, improving efficiency, and bringing the
                                                       and geographies?                                    Stakeholder considerations
   focus back to quality patient care.72
                                                    •• Realistically, how much of a health plan or         Ineffective data management, compliance
The cybersecurity conundrum                            provider’s confidential clinical, business,         issues, and cyber risks are often linked
WannaCry, a recent, widespread                         and patient data can a cybersecurity                with not having systematic approaches
ransomware attack, infected computers in               program (no matter how sophisticated)               to investments in people, processes, and
tens of thousands of locations, including              protect?                                            technology. Dated technology is everywhere
hospitals and telecom companies.73 In May,                                                                 and connected to everything— not just
a malware variant called Wanna Decryptor            •• How can data monetization opportunities             on desktop PCs. And while government
hit Britain’s NHS and infiltrated major                (already in use by health plans and of              policies and regulations seek to strengthen
international corporations such FedEx,                 interest to providers) move forward amid            health care security and safety on a macro
Telefónica in Spain and Portugal, and                  privacy constraints?                                level, individual organizations need to focus
computers in Russia, Ukraine, and Taiwan.74                                                                executive attention on compliance, ethics,
                                                    Among new legislation designed to mitigate             and risk.
These and other recent cyberattacks have            data access and security concerns is the
moved the issues of cybersecurity and data          European Commission’s General Data                     Many employees at hospitals, health plans,
risk management front and center. Health            Protection Regulation (GDPR), which reforms            life sciences companies, and governments
care is second only to the finance industry in      data protection rules in the European Union            lack awareness of and training to manage
the number of cyberattacks annually.75              (EU).                                                  financial, operational, compliance, and
                                                    The objective of the new set of rules, which           cyber risks. Led by senior management,
An average of one health care breach                came into force in May 2016 and will apply             organizations should perform a thorough
incident per day was reported in the United         beginning in May 2018, is to give citizens             assessment to understand how recent
States during the first half of 2017, with at       back control over their personal data, and             and upcoming policy changes will impact
least half of the incidents perpetrated by          to simplify the regulatory environment for             organizational priorities and explore
hackers.76 Globally, the average total cost of      business in the digital economy.78 Similarly,          strategies to build second-line defenses to
a health care data breach to an organization        the United Kingdom has “Patients Know                  reduce their administrative, financial, and
reached USD $3.62 million per incident in           Best”—a platform on which the patient                  reputational exposure.
2017. 77                                            controls who accesses their health record.

As patients take more active control of their       In May 2017, Japan’s Ministry of Health, Labor
health, they will likely be accessing public        and Welfare released the latest edition of its
and private health care in component parts          Security Guidelines for Health Information
(e.g., software applications, devices) and in       Systems. This edition incorporates measures
nontraditional settings (e.g., at home).            to address the risk of cyberattacks targeting
This independence is likely to complicate           medical institutions. Following the guidelines
quality assurance and cybersecurity efforts,        is not mandatory, but is recommended.
prompting such questions as:
2018 Global health care outlook l The evolution of smart health care

Investing in exponential
technologies to reduce
costs, increase access,
and improve care
There is no doubt that change is coming to health care. Exponential technologies are helping to drive that change by making care delivery less
expensive, more efficient, and more accessible on a global basis. Consider: Beginning in 1999, scientists spent five months and approximately
USD $300 million to generate the first initial “draft” of a human genome sequence. The cost to generate a human genome sequence is now less
than USD $1,000,79 and could eventually drop to less than USD $1. In coming years, exponential technologies have the potential to dramatically
disrupt the systems and processes that have historically defined the industry (Figure 5).

                Figure 5.

                Adoption of exponential technologies in 5-10 years
                12 key exponential technologies may reach varying levels
                of adoption and transformation within the next decade                              Ambient computing
                                                                                          Cognitive computing
                                                                              Data democratization

                                                                  Additive manufacturing

                                                        Virtual reality/augmented reality

                                                                       API/gig economy
                                                      Genomics & proteomics

                                                        Digital medicine
                                                                                                                         Degree of uncertainty
                     Syntheticbiology & nanotechnology

                 Experimental                   Early adoption               Early majority              Late majority                       Laggards

                    Source: Deloitte analysis

2018 Global health care outlook l The evolution of smart health care

Already, Japan is experimenting with care           Planning today for the hospital of                  For instance, spending on new hospital
robots to assist its elderly.80 In China,           tomorrow                                            infrastructure in India is expected to reach
clinicians are using AI to support imaging          With aging infrastructure in some                   USD $200 billion by 2024, and China plans to
diagnosis in lung, ophthalmic, and skin             developed countries and the lack of                 add 89,000 new hospital beds by 2020.91 92
diseases. A US startup is using AI to take all      robust infrastructure in emerging markets,
the data flowing through a hospital to learn        governments and private health care                 Demographic and economic trends, coupled
how to free up doctors and nurses to see            providers (driven by consumers) are                 with advancing technologies, could have
more patients and improve outcomes: One of          rethinking how to optimize inpatient and            significant implications for how hospitals
its clients has been able to treat 3,000 more       outpatient settings, and are planning               of the future will be staffed, sized, and
patients a year with the same resources, an         how to integrate digital technologies into          designed. For example, more health care
increase of 18 percent.81                           traditional hospital services to reduce costs,      services are taking place in outpatient
                                                    increase access, and improve patient care           settings and in the home (Figure 6), although
As individual exponentials combine with             in the future. In the coming decade, many           some types of patients—for example,
others, the convergences push technology            U.S. and European hospital executives               complex cases and the very ill—likely will still
ahead even more quickly.82 Among areas              plan to renovate or rebuild outdated                require inpatient hospital care.
where exponentials are beginning to help            infrastructure.88 89 90 Similarly, increasing
reshape health care:                                health care demand in emerging economies
•• Synthetic biology. Synthetic biology (an         should drive considerable hospital planning
   interdisciplinary branch of biology and          and construction.
   engineering) and the ability to create DNA,
   genomics, and proteomics are advancing           Figure 6. Health care expenditure by function—average of OECD countries
   rapidly. Applications for life sciences
   companies are phenomenal, particularly
   when considering how these technologies
   could be combined with cognitive
   computing, AI, and others.83

•• 3D printing and nanotechnology. Once
   scientists understand DNA sequencing at
   a detailed level, it reaches a point where
   they can print actual tissue—there are
   people today who have at least one ear
   that was printed. Through nanotechnology,
                                                                                      31%                      28%
   innovators could develop a customized
   white blood cell that is specifically designed
   to hunt down and attack cancer cells at a                                          31%
   molecular level.84
                                                                                      31%                      28%
•• Companion diagnostics. When paired
                                                                                      38%                      26%
   with targeted therapies, companion                                                 31%
   diagnostics (an in-vitro diagnostic device or                                                               46%

   an imaging tool that provides information
   that is essential for the safe and effective
                                                                     Hospital inpatient
                                                                                   38% services                26%
   use of a corresponding therapeutic
   product85), can help physicians to select an
   optimal treatment the first time, avoiding                        Oupatient services and long-term care
   the costly and risky practice of trial-and-                       Hospital inpatient services
   error prescribing.86                                              Other (includes drug spending and government services)
•• Biosensors and trackers. Biosensors                               Oupatient services and long-term care
   included in rapidly shrinking wearables
   and medical devices allow consumers                               Other (includes drug spending and government services)
   and clinicians to monitor and track more
   aspects of patients’ health, enabling earlier
   intervention—and even prevention—in a
   way that is much less intrusive to patients’
   lives.87                                         Source: OECD

2018 Global health care outlook l The evolution of smart health care

To learn what a hospital of the future may              has 79 digital hospitals, with 90 percent       operational insights.95 Facing a continuous,
look like, the Deloitte US Center for Health            of them built after 2016. Most of these         ever-growing influx of data from internal
Solutions conducted a crowdsourcing                     digital hospitals are located in economically   and external sources, hospitals will come
simulation in May 2017 with experts from                undeveloped provinces.93                        to depend on cognitive analytics to sort
across the globe. Participants included                                                                 through and find the most important data
health care CXOs, physician and nurse                   But there is no need to wait for a building     points and trends, analyze the data, and
leaders, public policy leaders, technologists,          boom to integrate emerging technologies         present actionable insights to clinicians,
and futurists. Their charge was to come                 into hospital operations. Numerous digital      patients, and caregivers in an easy-to-
up with specific use cases for the design of            solutions could be implemented now or           understand format that seamlessly fits into
digital hospitals globally in 10 years (a period        in the near future to improve operational       their daily activities.
that offers hospital leaders and boards time            efficiencies and clinical outcomes. Hospitals
to prepare). The crowdsourcing simulation               could implement remote patient monitoring,      Hospital expenditures on analytics are
developed use cases in five categories:                 telehealth, advanced analytics, and             anticipated to reach USD $18.7 billion by
                                                        wearables to more fully engage with patients    2020, up from USD $5.8 billion in 2015,
•• Redefined care delivery: Emerging
                                                        for improved quality and outcomes. Many         as hospitals focus on quality and cost
   features including centralized digital
                                                        back-office functions—finance, supply           reduction.96 But health care lags other
   centers to enable decision making,
                                                        chain, human resources, and revenue cycle,      industries in applying technology and data
   continuous clinical monitoring, targeted
                                                        among them—could benefit from robotics,         analytics to daily activities. Three functional
   treatments (such as 3D printing for
                                                        advanced analytics, sensors, and automation     areas that may need immediate attention:
   surgeries), and the use of smaller, portable
                                                        to drive cost efficiencies. These functions     operational (clinical coding, nursing support),
   devices will characterize acute care
                                                        also could be digitally improved by using       clinical (decision support tools to de-risk
                                                        cloud-based enterprise resource planning        processes), and back office (HR, payroll,
•• Digital patient experience: Digital and AI           (ERP) solutions to make them shorter, faster,   supply chain, patient/customer interface).
   technologies will help enable on-demand              and more responsive.94                          And as health care moves outside the
   interaction and seamless processes to                                                                hospital and into the home and community,
   improve patient experience.                          Where budgets allow, numerous countries         providers are expected to need analytics
                                                        are investing in tools and programs to          to address the challenge of measuring
•• Enhanced talent development: Robotic
                                                        digitize their health systems. Many Canadian    outcomes in nontraditional settings.
   process automation (RPA) and AI will allow
                                                        jurisdictions and individual and regional
   caregivers to spend more time providing
                                                        groups of hospital providers are working        No single organization has all the data
   care and less time documenting it as well
                                                        toward enhanced hospital information            required to look at a patient or targeted
   as help enhance their development and
                                                        systems to allow them to better manage          population in a holistic manner. This can
                                                        patient care in the hospital setting. A         limit the abilities of the health system that’s
•• Operational efficiencies through                     number of Mexico’s health systems are using     providing the care and the payer that’s
   technology: Digital supply chains,                   wearables, personal devices, and apps for       financing the care—directly impacting the
   automation, robotics, and next-generation            knowledge transfer and communication with       patient journey. In the United States, many
   interoperability will drive operations               physicians and patients. In the Netherlands,    health systems and health plans that are
   management and back-office efficiencies.             patient-centered health care enabled by         making value-based care a priority are
                                                        e-health solutions is a top agenda item         investing in population health analytics to
•• Healing and well-being designs: The
                                                        within hospitals and care organizations.        enable their strategies.
   well-being of patients and staff members—
                                                                                                        However, Deloitte research suggests that
   with an emphasis on the importance of
                                                                                                        most organizations aren’t yet sufficiently
   experience in healing—will be important in           Data and analytics
                                                                                                        focusing on cross-sector collaboration
   future hospital designs.                             Health data is the new health care currency,
                                                                                                        approaches that could unlock the synergistic
                                                        as organizations increasingly use advanced
                                                                                                        benefits of combining the best of what each
Most of these use case concepts are already             digital and cognitive technologies to mine
                                                                                                        stakeholder has to offer.97
in play. For example, as of early 2017, China           vast amounts of data to produce clinical and

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