Guest Post: Making Healthcare Affordable in Emerging Markets
In this Guest Post, Charles Dalton and Raju Narayan from the International Finance Corporation (IFC), shed light on the critical strategies required to ensure sustainable and quality healthcare for all in these regions.
The global population is ageing, with people living longer and having fewer children. This trend is particularly noticeable in developing countries. Morgan Stanley reports that the proportion of the population aged 65 or older is increasing by 2.7% annually in emerging markets, twice the rate seen in developed nations.
Simultaneously, the impact of climate change is introducing new challenges to healthcare systems worldwide, especially in low and middle-income countries. Additionally, advancements in development are leading to higher rates of non-communicable diseases like diabetes and hypertension.
Collectively, these factors are placing additional strain on healthcare systems that are already struggling to meet targets for universal health coverage and ensuring access to high-quality care.
Investing in healthcare in emerging markets is now more critical than ever. It demands a comprehensive approach to tackle the unique challenges faced by these regions.
Sustainable and accessible healthcare systems in countries experiencing such demands must be founded on four essential pillars: affordability, accessibility, quality, and ethical practices.
The primary pillar, ensuring healthcare affordability, is of utmost importance. Financial difficulties arising from out-of-pocket health expenditures are worsening, as highlighted in a 2023 joint report by the WHO and World Bank.
Catastrophic out-of-pocket health expenses – defined as exceeding 10% of household budgets – are on the rise, affecting more than one billion people, or 14% of the global population. This trend is particularly concerning in emerging markets where many individuals lack the financial resources to cover healthcare costs. Reducing expenses is vital for the long-term sustainability of healthcare systems.
It is crucial for governments to receive adequate support to bridge the affordability gap through enhanced financial coverage mechanisms. Moreover, healthcare providers have a responsibility to evolve their business models to deliver improved value for money.
The initial step towards providing sustainably affordable services is to ensure cost-efficient production, a principle that applies to healthcare services as well. By enhancing cost management in producing and delivering healthcare services, more individuals can access equitable and high-quality care. It has been observed that entities in emerging markets often excel in revenue generation but fall short in overseeing costs and performance analytics. Given revenue uncertainties, managing costs becomes imperative, thereby supporting more affordable care models.
However, achieving affordable healthcare is not solely about cutting costs indiscriminately. In reality, strategic investments are often required to reduce long-term expenses.
For instance, investing in resource optimisation can minimise waste, upskilling manpower can reduce recruitment costs, and leveraging health informatics and data analytics can enhance diagnostic and treatment capabilities for healthcare providers.
Can healthcare be delivered at lower costs without compromising quality? Broadly speaking, the answer is affirmative. The following practices can play a pivotal role:
- Quality Management & Benchmarking: Maintaining or enhancing care quality should be a primary focus, ensuring that cost reductions do not compromise patient safety, outcomes, or experience. Establishing benchmarks and monitoring them helps guarantee the required standard of care while enabling providers to compare performance and costs, learning from top performers. Tracking metrics such as patient outcomes, resource utilisation, and fees further aids in identifying best practices and areas for improvement over time.
- Efficiency & Productivity Enhancements: Providers should streamline operations by optimising workflows, reducing waste, and eliminating unnecessary administrative overheads. This may involve digitising patient records, automating appointments, optimising supply chains for cost savings, smart staff scheduling, reducing redundant administrative tasks, and leveraging technology for patient care and administrative purposes. Standardising clinical and administrative protocols can further reduce variability, minimise errors, and cut unnecessary expenditures.
- Value-based Care: Shifting from a fee-for-service model to a value-based approach encourages providers to focus on outcomes rather than service volume. This shift promotes cost-effective treatments, enhances care coordination, and rewards positive patient outcomes.
- Task Shifting: Given the shortage of medical professionals, tasks traditionally performed by doctors are increasingly being assigned to non-physician providers like nurse practitioners. When implemented effectively, task shifting can reduce overall labour costs while expanding access to care.
- Supply-Chain Optimisation: Efficient management of the healthcare supply chain – through automation, bulk purchasing, inventory management, or vendor negotiation – helps control expenses related to medical supplies and equipment.
- Time-Driven Activity-Based Costing (TDABC): Building on activity-based costing principles, this methodology incorporates time as a key factor for assigning costs to products, services, and customers. In healthcare settings where volumes and complexities vary widely, time-based costing offers a more accurate measure of resource consumption.
- Leveraging Technology: Technology plays a transformative role that must be harnessed effectively. Telemedicine and remote monitoring already enable doctors to reach and treat more patients promptly, reducing the need for in-person visits, particularly in rural and underserved areas. This results in earlier disease detection and timelier care delivery. Advancements in health information technology provide doctors with additional tools like data analytics and AI-powered diagnostics, enabling health organisations to optimise resource allocation and identify areas where costs can be reduced without compromising quality.
By combining these strategies and tailoring them to fit specific healthcare systems and populations, we move closer to the noble objective of making healthcare more affordable for all.
Charles Dalton and Raju Narayan are global healthcare sector specialists at the International Finance Corporation (IFC), the private sector arm of the World Bank Group.
Don’t miss HBI 2024’s Healthcare Investing in Emerging Market Summit, in partnership with the International Finance Corporation. The summit will be held on June 10, 2024, as part of the HBI 2024 conference. Join industry leaders and specialists as they discuss navigating the challenges and seizing the opportunities in emerging healthcare markets. With insightful keynote addresses, panel discussions, debates, and interactive roundtable sessions, this summit promises valuable insights for investors and healthcare providers.
Click here for more information on the Healthcare Investing in Emerging Market Summit.
