Inefficiencies in world health systems cost $3tn annually, researchers say

5 Jan 17

Substantial waste and poor outcomes in the world’s health systems could be alleviated by correcting mismatches in the way available resources are allocated, researchers have found.


Globally, as much as $3tn per year could be saved if health systems took steps to resolve conflicting incentives, behaviours, structures or policies that result in huge inefficiency and waste, the study argues.

The “misalignment” of resources this causes is partly the reason why health systems underperform, explained Mark Britnell, chairman and senior partner of KPMG International’s Global Health Practice. The organisation produced the study alongside the World Economic Forum’s Industry Agenda Council on the Future of the Health Sector.

“The good news is that where these misalignments can be identified, we believe they can largely be corrected while maintaining current levels of national health spending, and would enable global life expectancy to be extended,” he continued.

The report identified three main categories of “misalignment”: divergent objectives between the long and short term, or between different stakeholders; power asymmetries occurring when one stakeholder has an advantage over others; and cooperation failures such as disconnected budgets, lack of leadership or barriers to data sharing.

The excessive and inappropriate use of antibiotics, leading to growing resistance among bacteria, is an example of where immediate comfort has been prioritised over long-term consequences. Different stakeholders have also played different roles in this looming crisis: doctors have needlessly prescribed antibiotics, or prescribed the wrong kind; patients have failed to finish their course.

Meanwhile, the immense power of the tobacco industry has prevented some governments from implementing regulations to control tobacco consumption, resulting in a higher prevalence of one of the world’s most costly health issues – cancer – among a host of other nasty diseases.

Finally, poor interoperability between electronic medical record systems in national health services leads to redundant testing, medical errors and disjointed care, representing a cooperation failure, the report highlighted.

This not only results in a substantial waste of resources, but it also means health systems drastically fail to meet their potential. The report concluded that global life expectancy could be increased by more than four years if these “misalignments” could be corrected.

Some stakeholders have already managed to smooth out these mismatches. Swiss pharmaceutical company Novartis AG and two US insurers, Cigna Corp and Aetna, for example, have managed to align their ‘divergent objectives’ by agreeing a deal that sees risks and rewards shared more equally.

Another insurance company, South Africa’s Discovery, repays some of the financial returns of healthy living to its members, through reduced insurance premiums, discounted gym membership or cash back on healthy food purchases.

Other examples highlighted in the report included an Indian NGO that trains a patient’s relatives how to care for them after their operation or injury and a US hospital that developed an electronic system to track patient treatment and outcomes. The report featured no examples from the public sector.  

But it did stress that some well-established instruments, including taxes, subsidies, regulation and public health education, could be used by governments to remove obstacles to well-aligned health systems and facilitate efficiency.

New models for value-based care or payment mechanisms keyed to health outputs rather than inputs are also key instruments to achieving alignment, the report said. It also pointed to technological innovations, such as high quality digital health consultations and harmonised electronic medical records, which could help rid health systems of their mismatches and inefficiencies.

Finally, it noted that achieving alignment will require committed leadership and cooperation between stakeholders.

David Bloom, chair of the WEF’s IAC, said: “In many cases, improving health outcomes is not about throwing more money at a problem. It’s about being more efficient with the resources currently available to us, and working more closely together to identify and overcome the many inefficiencies that plague the health sector.”

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