August 27, 2023
The cost of healthcare is increasing, just like everything else. It’s not an issue to be spending more money on health, as long as we’re getting value for money.
But are we? Can we (or should we) get more value for money from a health system, which according to Urvashi Yadav from Berl, has an insatiable demand for expenditure. You will note below that New Zealand health spending has increased by over 100% (in $billions) since 2005. Have we achieved sufficient additional output, or improvements in quality of care to justify this?
A big driver of healthcare spending relates to workforce and wages, which account for a big part of the health budget. The size of our workforce has increased, wages have increased, and so health spending has increased as well.
Population size also plays a large part. The more people we have, the more we need to spend on healthcare. Back in 2005 our population was 4.1 million, while today it’s 5.1 million.
So far, so linear. Workforce growth is in step with population growth and the cost of healthcare steadily increases. However, if workforce growth slows, and the population continues to grow… then there would be a problem. Can this problem be dealt with?
Why would growth of the health workforce slow, or even decline? Most commonly it occurs when healthcare workers retire faster than we can replace them. Less people commence training, which is often combined with an increase in the time to train them (training capacity can be negatively impacted by workforce limitations). The issue is further exacerbated when international candidates prefer countries other than New Zealand. Does this sound familiar?
Population growth continues because we have an ageing population and we are living longer, thanks in no small part to the health system (oh the irony). This scenario unfortunately causes health systems to run into a systemic capacity problem.
The issue relating to population growth and the ability to service our citizens is best illustrated by the projected decline in the number of GP FTEs per 100,000 people in NZ. The total number of people needing GP care is increasing, but the number of GPs available to care for them is projected to decrease. The same applies to aged care. The total number of people needing aged care is increasing, but the number of aged care beds and staff members is decreasing.
We aren’t the only ones facing a capacity crisis. The Guardian recently published an article about the NHS being locked into a death spiral. An NHS doctor recalled the exact moment when the NHS ran out of hospital beds back in 2012. “I hoped it was an anomaly but sadly the same thing happened every year after that” said Dr Nick Scriven.
In England, projections show that the number of people living with major illnesses is rising nine times faster than the healthy working age population. Anita Charlesworth of the Health Foundation pointed out that “the challenge of an ageing population with rising levels of major illness is not unique to the NHS. Countries across the globe face the same pressures. How well prepared we are to meet the challenge is what will set us apart.”
Charlesworth emphasised the need to invest in capacity: “by failing to invest in the capacity the NHS needs, we’re failing patients, we’re failing staff and we’re failing the taxpayer, because a productive and efficient NHS is also really important for economic growth.”
In NZ, economic growth hasn’t been able to keep pace with the health system’s insatiable appetite for expenditure, making it harder to invest in capacity. A solution that costs a hundred million dollars but saves a billion dollars isn’t viable if you don’t have a hundred million to spend on it in the first place.
NZ hospitals still regularly exceed 100% occupancy, despite healthcare expenditure (as a percentage of GDP) increasing from 8.27% to 10.03% between 2005 and 2018.
You might think that over the course of two decades, with technological advancement and policy development we could help our workforce to become more efficient and our population to be healthier, reducing our health spend on a per capita basis. But not so.
Health expenditure per capita has been increasing almost every year. This is probably because the older population is growing faster than the general population and healthcare issues increase with age. The scary thing is that healthcare has barely even felt the impact of the baby boomers yet. The very oldest baby boomers (born circa 1945) are not yet 80. They will live longer, and managing their health issues will be more complex. It will be more expensive than anything we have ever seen, and at a scale that the system has never experienced. The elderly will increasingly dominate care beds in the public hospital system. Is this the cohort that the community spend on health should be disproportionately directed to?
With this tsunami of healthcare costs on the horizon, any logical person might ask how, as a country, we can afford it? And do we need to rapidly invest in the capacity of our health service. If we don’t find ways to prevent ill health and make our health spend more efficient, we won’t have the capacity to manage the care of our aging population. Access to healthcare will get harder, and the ever-growing cost of health might prevent us from sustaining other core services at their current levels.
An example is education, where investment since 2005 shrunk from 5% of GDP to just 4.6% in 2018/19. The cost of healthcare is removing our ability to invest greater amounts in these other services.
A shortfall in health spending in one area, tends to reverberate in another and the total cost of healthcare keeps increasing. But there are potential savings if the right approach is taken. And the way to measure these is in terms of capacity gained. More specifically gains in patient capacity (sometimes referred to as patient ratios).
The only way NZ will be able to control its current cost per capita for healthcare (in the face of an aging population) is to seriously improve the capacity of our current health workforce and our existing facilities. If we can do that, we will be able to manage patient ratios better and deliver the level of care people need, rather than level of care we have time for. One of the most obvious solutions is to promote the use of technology that makes our existing workforce more efficient.
Robot-assisted surgery is a good example where gains have been made. As our population ages we will undoubtedly need more hip and knee replacements. More orthopedic staff and more facilities for surgery and recovery can’t come fast enough for patients on growing waitlists.
New robot-assisted technology, first used for knee surgery here in 2017 and just recently for hip surgery, can increase capacity in the health system by shortening recovery time and reducing complications.
When the health system enters contracts to use this kind of technology it supports ongoing investment in this area, which compounds the health system gains as the technology improves. Since 2015, robotic surgery technology has continued to improve.
Local NZ company Sense Medical is a specific example. Their patient management platform (known as Cortex) transformed care delivery at Christchurch Hospital, with mobile first technology that eradicated paper-based patient lists and transformed workflows.
A long-term contract with Christchurch Hospital back in 2017 supported their ongoing investment in the platform, which led to contracts with other hospitals… which fueled further investment and resulted in the delivery of new features such as Emergency Calls (a smartphone replacement for legacy pager systems.)
Over the years, Cortex has been responsible for significantly reducing the length of hospital stays, reducing re-admissions, and lowering bed night numbers. They recently hit the milestone of 1 million tasks managed through Cortex.
Remote patient monitoring can have a similar impact. By managing care remotely, it is possible to save the workforce time and reduce pressure on hospitals. This adds capacity, without the need to recruit staff or build facilities (saving time and money).
If we want RPM to work for New Zealanders, we need the health system to embrace RPM on a scale that supports research and development of RPM for the NZ health system. That’s what takes technology from good to great. It is achieved through continuous improvement because of R & D.
When the health system permanently adopts innovative technology that increases workforce capacity, it is funding research and development in that technology. As a result, the capacity of the health system keeps growing. It has the same cumulative effect as compound interest.
The sooner we move along this road the better. The earlier we enable far-sighted and innovative technologies with multi-year contracts, the greater the gains will be and the sooner the community will benefit from them.
Our ‘speed of travel’ will also increase, driving faster and faster innovation through scale. We should remember that technology can help us to manage the health of more patients without necessarily increasing the clinical headcount.
Investing in key areas such as RPM and putting long-term contracts in place as early as possible, is an investment in our capacity to provide for a healthier community.
