Technology: cost driver or investment?

01 October 2008 Irene Zambelis, IHRM

Medical schemes and the public sector are demanding low-cost, innovative treatment methods. On the other hand, the quality of healthcare services needs to be improved continually, and one way of doing this is through the use of new drugs and technology.

The emergence, adoption and widespread diffusion of new technologies has contributed to the growth in healthcare spend. Although medical technology sometimes entails high add-on costs and brings only minimal added benefits, great hopes are being placed in new therapies. In this context cost-benefit analysis merits as much attention as the ethical and legal issues.

Lower costs

In principle, the advances in medical technology should have a positive impact on the healthcare system, creating more effective methods of treatment, which are often less invasive, and consequently are associated with shorter stays in hospital and a faster healing process. The result is a reduction in productivity losses for the economy as a whole.

Therefore, seen in overall terms, investment in medical technology should lead to lower total healthcare costs based on the same level of demand. But in order for this to be achieved in practice, the funder would have to ensure that cuts in other items in the budget actually materialise, e.g. fewer days in hospital.

Appropriate use

One needs to consider the balance between application and effectiveness of medical technology. Imaging, for example, is very important in diagnosis and in helping to avoid costs; yet at the same time it is very easily abused. This is a dilemma that is difficult to resolve, especially in light of the healthcare "market" with its particular economic, political, and ethical considerations. Some new technology products are simply new types of gadgets with no evidence that they contribute to prevention, diagnosis or treatment.

Therefore, in order to promote adequate treatment of the patient, and appropriate use of medical technology the value of the technology needs to be thoroughly documented, and one needs to be more aware of positioning and pricing. Healthcare providers should critically assess the value of the services they provide with a focus on medical necessity.

Rationing of technologies

Rationing of medical care technologies has become an important topic globally. Given the limited ability of any healthcare system to increase its healthcare budget indefinitely, choices regarding the allocation of funds have become inevitable. To achieve the best clinical outcomes within the available fund allocation, the efficacy, safety and quality of technologies including medicines must be ensured, their prices optimised and their appropriate usage ensured.

Legislation supports medical schemes in this regard, by allowing for the application of formularies and clinical reimbursement protocols that take into consideration evidence-based medicine, cost-effectiveness and affordability, as well as the appointment of designated service providers.

The use of drugs and technologies is ultimately determined by the healthcare provider at the point of service. Unfortunately, some healthcare providers opt to ignore medical scheme funding limitations altogether, placing the medical scheme member in the unenviable position of having to carry the cost difference.

Collective decisions

No single party can be blamed for the rising healthcare costs. Instead it is crucial that all elements of the healthcare system, its structure, financing mechanisms, the role of government, consumers, providers of drugs and technologies, physicians and hospitals are taken into consideration in any reform. The 20% of patients who generate 80% of healthcare expenditure each year are for the most part spending someone else's money.

Collective financing of healthcare calls for collective decisions about how much to spend.

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