Healthcare Globalization
As the healthcare industry scales up to meet emerging financial pressures, big healthcare brands from the US are partnering with international healthcare markets. The industry must stay on top of this trend in order to support new challenges that are not well understood today.
What is healthcare globalization?
The healthcare industry is facing economic challenges. As the population ages, healthcare spending increases and the supply is outweighing the demand. This is leading to economic challenges that are difficult to solve in the current environment.
Merger and Acquisition (M&A) activity has been a trend in healthcare for the past decade. Now, however, we are starting to see this industry consolidating at an international level. Well-known North American healthcare systems such as Partners Continuing Care, Cleveland Clinic, Johns Hopkins and more are purchasing or partnering with health systems in other countries. We are seeing this at a much larger scale than we’ve seen in the past.
For instance, Boston-based Steward Health Care is now the primary health system of the entire country of Malta. This is in addition to 39 community hospitals in the US.
Moreover, if we look at the combined company RL Datix, they will now have a foothold in over 19 countries around the world. Interestingly, this international growth was not attributed to new sales regions, but rather to the global expansion of their existing clients.
Why is the healthcare industry going global?
Scaling Up to Stay Afloat
Like many other industries today, scaling up is a primary business goal and often involves expanding a company’s geographic footprint to obtain more sources of revenue. Some may consider the healthcare industry to be public and non-for-profit, but that is not true in one of the biggest economies in the world — the USA. Healthcare spending in the USA alone accounts for about $3.7 Trillion per year with annual growth rates of about 4.1% (source).
“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).” — (Source 1)
Despite the increased spending, profit margins are not growing proportionally. As such, health system CEOs need to look for other sources of revenue to offset the rising costs:
“We have to look outside our traditional world if we’re going to survive,”
- Randy Oostra, president and CEO of ProMedica told Wall Street Journal
Mutually Beneficial Partnerships
International health systems are not as well-versed in healthcare quality and access as their North American counterparts are. In order to learn from methods that have been proven successful, other countries encourage north american brands to take on the healthcare challenges in their regions. For instance, the quote below was taken from an annual UAE Healthcare Sector Report calling out some of their successful new partners:
“Collaboration with international brands such as Johns Hopkins and the Cleveland Clinic … made quality health care more accessible.”- UAE Healthcare Sector report
Regulatory Push for Universal Quality Care
The WHO published their Sustainable Development Goals (SDG) and among them was to achieve universal health coverage (UHC) including financial protection, access to quality essential health-care services and affordable medicines and vaccines for all. (Source 2) This is an extremely lofty goal considering the current state of healthcare quality and access among low and middle income countries.
Firstly, there are roughly 2 Billion people in the world that live in extreme adversity with absolutely no access to healthcare (Source 3). To compound this problem, there is little research on these extreme conditions to support WHO’s goal of universal access.
Second, without government buy-in to UHC, accessing health services could bring individuals into extreme poverty. Recent research indicates that 800 million people a year spend at least 10% of their income on healthcare expenses(source). It will be extremely challenging to solve access issues without introducing single payer healthcare systems supported by international governments.
“26% of physicians favor a single payer health system, 35.5% favor single payer with a private insurance option, and 27% favor a market-driven system” (Source)
Finally, not all healthcare services are created equal. Fraud and Abuse in healthcare has hit record highs in recent years due to improvements in fraud detection technologies. In some cases, patients are treated with high risk procedures for diagnoses that were never positive to begin with. One example was Dr. Farid Fata, who plead guilty to giving cancer treatments to misdiagnosed patients, telling some they had a terminal blood cancer called multiple myeloma. He pleaded guilty to 13 counts of Medicare fraud, one count of conspiracy to pay or receive kickbacks and two counts of money laundering (source).
More recently, a physician plead guilty to a $60M fraud scheme prescribing morphine and hydromorphone to at-risk patients, resulting in accelerated deaths (source).
This is a concern that will be compounded as health systems scale into emerging markets that dont offer the same protections to patients that we see in North America. We can expect that some of these systems will be acquiring liability beyond their control.
Moreover, in many developing countries healthcare is completely unregulated and decentralized. Brazil, for instance is recovering from historically low access to healthcare with a completely decentralized model of universal healthcare access. Municipalities provide free health care that is funded by the states and federal government. However, this model is difficult to control and to predict future expenditures. As such, it is a risky market to break into and may be why we are not seeing major healthcare systems in that market yet.
In Summary
The healthcare industry already deals with complex challenges of fragmented leadership, siloed delivery, and poor adoption of technology. Now, the industry must shift its business focus to maintain positive profit margins in an economy that cannot support itself. In order to stay in the black, healthcare organizations are expanding to global markets, introducing challenges that may bring more harm than good.
As an optimist, I want to say that access to affordable and quality healthcare will become a global human right in the next decade. As a realist, however, I doubt that we will ever get there.
- Centers for Medicare and Medicaid Services (CMS) “NHE Tables” and “Historical and Projections 1960–2024” National Health Expenditure Projections, 2016–25: Health Affairs
- SDG3: Ensure healthy lives and promote wellbeing for all at all ages. http://www.who.int/sdg/targets/en/. Accessed September 17, 2018
- Berwick D, Snair M, Nishtar S. Crossing the Global Health Care Quality ChasmA Key Component of Universal Health Coverage. JAMA. Published online August 31, 2018. doi:10.1001/jama.2018.13696
