How to change the economics of healthcare

Amid the headlines of staff shortages, hospital deficits, overwhelmed A&E, and a lack of social care leaving people unable to leave hospital, it is hard to ignore the NHS crisis. And according to the Health Foundation, the NHS funding commitments from all three political parties are inadequate.

Demand pressures from a growing and ageing population, and increasing numbers of people with complex chronic health problems such as diabetes, will all add cost pressure. And unlike other sectors, the cost of technology is not declining – it contributes to spiralling healthcare costs. For example, the latest pacemaker – the size of a grain of rice – reduces potential complications, but at a high cost.

The economist William Baumol famously described the cost disease of labour-intensive services like healthcare. While manufacturing benefits from increasing productivity due to technology advances, healthcare is unable to benefit from the same advances. This is because healthcare provision inevitably relies on people - doctors, nurses and supporting clinical teams that cannot be replaced with machines. (Really what we go on to say is that administrative tasks can be replaced with robots, making the patient facing clinical teams more productive).

Can the economics of healthcare be changed?

Perhaps the fourth industrial revolution, which is being built on developments in the internet of things and artificial intelligence/machine learning, will create opportunities. The Royal Society’s recent report highlights some of those presented by machine learning. These include the use of machine learning to read and interpret clinical diagnostics, such as radiology scans. All made possible by the huge growth in cloud computing services and the opening up of access to vast amounts of data, such as Stanford’s Medical Image Net.

These advances will mean better healthcare. But these advances may also lead to higher cost – the cost of reviewing radiology scans may fall, but the number of scans may increase. And with more diagnostics may come more overtreatment.

So can advances in technology increase productivity in health?

The role technology can play in removing operational inefficiencies (how things get done) is often overlooked. The BBC 2 programme Hospital highlighted the impact these can have on patients – e.g. poor scheduling operations.

Many of these problems occur due to the complexity of healthcare and some of the problems faced on a daily basis - is it really possible to know in advance how long an operation will take when there are so many variables?

Our experience is that this is possible, but there are a number of changes the NHS will need to make if it is to benefit from the advances in data science.

So if advances in technology can solve some of the simpler problems, then perhaps it is possible to change the economics of healthcare without needing to replace doctors with robots.

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