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Saturday, 7 February 2015

Healthcare, medicine mafia and Automotive

Many years ago I was introduced to someone who was busy with setting up a company for introducing a long existing, but out-of-patent, drug which had shown some remarkably positive effects on people with another - but more rare - disease. Apparently this phenomenon is even quite common as many proven effective drugs get alternative applications. He was the first one ever to teach me the word medicine mafia. This term is well known within the healthcare industry but hardly outside. An interesting observation.

The medicine mafia does its very best to restrict market access to newcomers to protect the high profitability of that sector. Every product that gets the label healthcare suddenly explodes in value especially in the case of auxiliary materials. Despite the availability of cheap over-the-counter generic brands, the expensive healthcare labeled products tend to be preferred.

Privatising healthcare is clearly not the solution as the USA should have taught us by now. Their system is extremely expensive compared to ours. Privatisation has caused an incentive for performing - and billing - even more medical procedures as profit is in volume. It is not uncommon in the US for billing unnecessary procedures or even procedures that were never ever carried out. Nevertheless, we are looking at privatising hospitals while they are looking at our healthcare system (Obamacare).

When neither our Dutch model nor the US private commercial hospital model is the solution then it is time to monitor other industries for proven effective cost control solutions.

To some extent patients, hospitals and insurers could be compared with cars, car repair / body shops and car leasing companies. In both cases cost control for the insurers and leasing companies is cumbersome due to the immense volume of transactions.

Nevertheless, Automotive could still teach healthcare some valuable lessons. In many industries the majority of transactions is rather default (70-90%) and the minority (10-30%) is very specific and thus usually expensive. In Automotive, the default authorization requests for car procedures are fully automated. Their reimbursement is also fully automated. For other transactions a manual authorization is required before a procedure can start. If there is no authorization then there will be no reimbursement. This situation brought back cost control in Automotive.

While developing an automated medical authorization and reimbursement system could take several years, the cost savings could be well beyond imagination especially when auxiliary materials would also be included. To some extent an effort in healthcare has already been made many years ago when a price database was built that shows which (generic) medicines are allowed for reimbursement and to what extent.

Obviously there were some complaints in Automotive when drivers - for instance - were refused new tires - shortly before their annual vacation trip - given close proximity to maximum contractual mileage. These incidents were more foolish then serious however.

Ethical questions about refusing treatment to patients - for instance given their very high age - would be a political issue rather than a consideration for healthcare insurers.