From correcting inefficiencies to making room for innovation, every healthcare system experiences continuous change – especially during a pandemic. With specific focus on the US, what’s in store for the future of healthcare?
Covid-19 caused significant disruptions which revealed the weaknesses and strengths of global healthcare systems, but it also accelerated the adoption of innovative, inclusive and affordable solutions.
As one of the biggest in the world, the US healthcare system is frequently under the microscope. Healthcare costs are a regular point of political debate, and the focus tends to centre on unit pricing. But what about the bigger picture? In the era of The Great Instability, variables are interconnected as never before. Inefficiency can be linked to several problematic factors, and Covid-19 might have just helped unveil them.
Is there a cure for inequality?
Both the pandemic and its guidelines impacted significantly those at the lower socioeconomic end of society – mostly African American, Latin and Native American populations. But it’s not a surprise that social determinants of health – the conditions in which people are born, grow, live, work and age – determine 50% of health outcomes, while health behaviours (alcohol/drug/tobacco use, diet, and exercise) determine 30%. In other words, 80% of health outcomes aren’t based on clinical care at all.
Also, healthcare access depends widely on location. Rural community hospitals – 29.5% of the US total – face increasing pressures with physician shortages, low patient volumes, an older population base and a higher percentage of Medicare and Medicaid beneficiaries. Increasing closures exert even greater pressure – also with consequences on employment that exacerbate the social determinants of health.
From twisted incentives…
The reimbursement structure may be another under-appreciated problem. Fee-for-service (FFS) is the currently predominant system, which perversely risks to incentive frauds and over-treatment. The system doesn’t favour patients with complex needs and fails to address social determinants and care gaps, contributing to greater instability. But what’s the alternative?
…to the incentive of value
Value-based systems, by connecting reimbursements with the outcomes achieved, align everyone’s interests and push providers and payers to address factors that improve patients’ health while reducing costs – like prevention.
It’s not always easy for insurers to evaluate the factors’ relative cost-effectiveness. However, the latest trends and technologies are making it easier, and the transition to value-based care is partially happening, with vast implications.
Room for innovation
As payers and providers become increasingly discerning purchasers of services, devices and therapeutics, investments are usually impacted. Data interoperability, increased connectivity, remote monitoring, infectious disease surveillance and analytics might see a boost, alongside wearable diagnostics and intervention technologies on the device side. Within therapeutics, payers might apply increasing price pressure on older drug classes to make room for investments in areas of unmet medical need. But what about the actual delivery of care?
Out of sight, not out of mind
Until recently, there has been little innovation in the way physicians carry out diagnoses and treatments. Although the use of telemedicine has slowly been growing over the last few years, there was no widespread adoption. Covid-19, of course, changed this dramatically.
With major segments of the healthcare delivery network shut down, patients, caregivers and healthcare providers needed to rapidly adapt. Managers started contemplating virtual outreach and collaboration tools offered by telemedicine companies. Furthermore, these tools required a centralised network to integrate record data from diverse sources.
A much-needed shift
So, the pandemic accelerated the adoption of a virtual gateway into the health system, with many interconnected benefits: more urgent care delivered more cost-effectively; better engagement with patients, and therefore better and cheaper care management; stronger coordination; and the delivery of care to patients who live in isolated areas. All of this, within an increasingly value-based reimbursement framework.
A brilliant example
To appreciate what innovation can do, let’s consider diabetes. As it requires daily monitoring of glucose levels and insulin injections to regulate them, diabetes is an extremely difficult disease to manage. Its annual cost in the US in 2017 represented one-seventh of all healthcare costs – US$ 237 bn for direct medical expenses and US$ 90 bn for reduced productivity.
Today, thanks to advances in device engineering, connectivity and software, increasingly small and integrated monitors send continuous glucose readings to an on-body insulin pump that, through algorithms, calculates and injects the dose. These technologies allow patients a greater sense of independence and significantly cut clinical care costs.
Artificial intelligence: the good, the bad and the ugly
Speeding up drug discovery, analysing medical images and assisting diagnosis via patten recognition are just some of the things that AI can do. But, in today’s complex reality, where any positive change can lead to unpredictable consequences, should we embrace it with unconditional trust?
With Covid-19, AI helped in three areas: prediction, screening (with diagnoses as fast as 20 seconds), and assessment. The AI technology of Blue Dot, a small private Canadian company, predicted the Covid-19 outbreak before the US detected the virus and China made an official announcement and mapped the spread by analysing airline ticketing data.
There are downsides, though, like the potential for biased data to result in inaccurate models. For example, if a genetic database is built from data collected primarily from people of European descent, any conclusion may be biased when applied to people of different ancestry. In general, most Al systems are designed to assist rather than replace humans, making many processes faster, more accurate and cheaper.
Speaking of trust, Covid-19 contract tracing via mobile phones has also dominated the debate. In early April, the two largest smartphone operating system providers collaborated on how to protect privacy. Their solution, based on Bluetooth rather than satellite systems, infers contact by just detecting which phones are in proximity to each other. If one user self-reports as positive, the others get an alert without the government knowing identities and locations. And explicit consent is required to opt into the system.
But speedy adoption was crucial, and as of October 26, only 13 states in the US had implemented the system. On a positive note, a recent study found that, even with just 15% of the population participating, these systems could reduce infections and deaths by approximately 8% and 6% – still a valid aid to manual tracing.
Methods and molecules
Finally, biotechnology has been hugely innovated by scientific advancements and AI, allowing an incredible decline in the cost of genetic sequencing and the rapid analysis of related data. Such developments revolutionised drug development.
The biopharmaceutical industry had previously been powered by advances in chemistry. Molecules were tested for potential therapeutic utility without any understanding of underlying disease biology. In terms of efficacy, it was like trying to find a needle in a haystack. Additionally, toxicity was a problem. Today, the process begins with an analysis of the disease and the identification of therapeutic targets, before moving to the construction of molecules.
The process can move very rapidly, as shown by the response to the pandemic. The Covid-19 virus was gene-sequenced within less than a month from the official disclosure of the first case. This accelerated the development of both diagnoses and vaccine candidates – and it seems increasingly likely that a vaccine will be commercially available in less than one year.
More than COVID-19
But the impact of biopharma innovation is broader and involves several illnesses, like cancer, orphan diseases and others. One great example is cystic fibrosis. Before the introduction of genetically targeted therapies, the annual reduction in lung function was around 2-3% and life expectancy around 30-35 years. In 1989, scientists uncovered the mutated receptor that causes the disease, enabling the development of new molecules that directly target the core issue. Patients will now be increasingly likely to live well into their mid-40s, with benefits for the whole society.
Today’s precipitous decline in cost/genome is accelerating the cadence of innovation so significantly that the Food and Drug Administration anticipates that, by 2025, it will be reviewing/approving around 10-20 cell and gene therapies each year.
Like other crises, the Covid-19 pandemic doesn’t just expose inefficiencies but has the potential to accelerate innovation. In a resilient healthcare system where companies are mobilising in several ways, what’s the role of investors?
At BNP Paribas Asset Management, we look at today’s complicated, unstable world with a diagnostic approach. Before we invest, we investigate all the aspects involved, so we can help you spot opportunities. Our Health Care Innovators Fund is managed by an experienced team in Boston, incorporating strategic and ESG considerations to target innovative companies. This makes our portfolios exposed to the themes most likely to underpin the ongoing system transition, helping us towards delivering long term sustainable returns for our clients.
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