“Maximum entrepreneurial freedom for hospitals” | KPMG | CH

“Maximum entrepreneurial freedom for hospitals”

“Maximum entrepreneurial freedom for hospitals”

Executive Councilor Thomas Heiniger explains his interpretation of the requirements of the Health Insurance Act and why he compares the healthcare system with a pyramid.

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The healthcare system is costly and highly regulated. How will the government successfully motivate hospitals and other healthcare providers to take on greater entrepreneurial responsibility while also sustaining a heavily regulated regime at the same time? We take a close look at these and many other questions in an interview with Dr. Thomas Heiniger, Member of the Government Council and Head of the Department of Health of the Canton of Zurich.

Thomas Heiniger, Executive Councilor and Head of the Health Department of the Canton of Zurich

The healthcare system in general and hospitals in particular are heavily regulated and are under close scrutiny by a variety of special-interest groups. Will hospitals have to expect even more rules and requirements in the future?

I’m of two minds about that. According to my interpretation of the hospital requirements set forth in the 2012 Health Insurance Act (KVG), hospitals’ entrepreneurial freedom, and thus their responsibility, is to be preserved to the largest degree possible. The individual institutions are supposed to be given the chance to develop and differentiate themselves on the market; this is also the only way that the free choice of hospitals as stipulated by the KVG makes sense. Of course this should also be taking place within a defined framework which is indispensable in the healthcare sector.

Yet this framework is also being tightened more and more by the KVG.

The way I see it, as much freedom as possible is to be given to the individual healthcare providers in terms of determining their structure, whether they be a hospital or a primary care physician, and government guidelines should only come into play in areas where competition alone is incapable of ensuring treatment availability or a certain level of quality, thus making government support a necessity.

Are minimum case numbers and the resulting reduction in the range of services offered the right way to boost service quality and encourage the free choice of hospitals?

Our experiences with minimum case numbers are extremely positive. Facilities with defined minimum case numbers managed to cut average inpatient stays, reduce mortality and halt rising costs. We’re noticing this effect in other areas of the healthcare system as well.

Hospitals’ primary concern right now isn’t about losing their ability to offer specific services because their case numbers aren’t high enough, instead they’re afraid that a more limited range of services might diminish their clinic’s reputation which, in turn, would also make it less attractive to top-notch staff.

I think the pyramid model is the key. That means extensive, broad, decentralized coverage for basic healthcare services and a specialized range of individual treatment options and services at specific locations. There’s nothing preventing smaller, regional hospitals from providing very specific services they excel in and which can’t be found everywhere, however it’s neither expedient nor rational to have every hospital offering the full range of services and hiring the most distinguished specialist in every field. It’s conceivable that, depending on the case at hand, the individual hospitals could provide mutual assistance in the form of expertise and specialists. That’s already happening today whenever a gynecologist from the University Hospital Zurich teams up with a pediatrician at the Children’s Hospital to perform surgery on an unborn fetus. This kind of collaboration needs to happen much more frequently so our top-rated specialists can be deployed optimally, even across the entire network of hospitals.

From an economic standpoint, is there any such thing as a “right size” for hospitals?

The success of a hospital or healthcare provider isn’t primarily a matter of size. There are healthcare providers that offer a very limited range of services but do so efficiently because of their large case numbers. The broader a clinic’s range of services, on the other hand, the higher its case numbers need to be.

Many hospitals have big expansion plans tucked away in a drawer. According to our rough estimate, projects worth a total of around CHF 30 billion are awaiting implementation in Switzerland. Given the increase in regulation and tougher competition, can this expansion ever possibly pay off?

Looking at the projected rise in the number of hospital beds in the Canton of Zurich over the next few years, you’ll notice a curve that is flatter than the canton’s population growth. Given that the Zurich metro area is a magnet with a high influx of migrants, its infrastructure, including its healthcare services, also needs to grow. Plus quite a large number of the construction projects concern renovation work on existing infrastructure rather than capacity expansions.

Do these infrastructure renovation projects incorporate new efficiency concepts?

That’s just it. Modern process planning needs to be incorporated into renovation projects wherever possible. We once compared the production line and process management used in a modern automobile plant to the path a hospital bed follows when surgery is to be performed. On the one hand we had a manufacturing process that was optimized down to the very last detail, on the other we had a chaotic series of zigzagging movements and workflows which all formed part of the patient’s care. In this respect, we still have a lot to learn from industry, even if the premises of human medicine are naturally quite different than those underlying industrial production. But one thing is certain: Streamlining needs to be the primary approach for cutting costs, not downscaling. Plus potential lenders, whether these be banks or the government, will assess renovation and new construction projects in terms of their economic viability.

The healthcare system is an attractive market. A growing number of healthcare providers are seeking to enter the market, some of which are coming with fresh new ideas. What do you think about this?

I watch market trends with interest but also a certain degree of equanimity. Society has different needs today than it did just a hundred years ago. Our 24-hour society demands new products and services. There’s a growing trend toward offering round-the-clock medical services, a development that certainly makes sense in light of the infrastructure involved, some of which is quite costly. We’re also seeing an expansion in the range of treatment options and services offered. Primary care physicians are becoming health coaches who advise patients during the various phases of their lives and monitor the progress of medical and therapeutic procedures. I essentially welcome innovations and new offers, however patients always have to keep in mind that every treatment also comes with a price tag.

Does that mean a fundamental change in physicians’ job descriptions?

Yes, there’ll definitely be changes. Nowadays, for instance, women make up the lion’s share of medical students, so it only goes to follow that they’ll be entering medical professions in larger numbers as well. This will be accompanied by new job models, too, that facilitate a better work-family balance. Another trend is to house several different services under one roof; in other words, partnerships are arising between physicians and therapists, pharmacies, etc.

In rural, peripheral regions we’re finding that hospitals are stepping up as comprehensive providers and coordinators of services, even those provided beyond the scope of the hospital’s actual operations (e.g. home and elderly care). Zurich’s hospitals, on the other hand, are still very focused on the traditional inpatient and outpatient business.

When I see that hospitals in Zurich are already planning a patient’s discharge even before they’ve been admitted, in other words that patients are receiving more care and support both before and after their hospital stays, I think that’s a valuable change in the right direction. Even in the large metropolitan areas, collaboration between hospitals, rehab centers and other providers along the healthcare supply chain will become closer. The concept here is integrated healthcare. This process definitely needs to be pushed ahead in the Canton of Zurich, though.

You chair the Swiss Conference of the Cantonal Ministers of Public Health which also gives you an insight into the big picture of what Switzerland needs and which changes are happening. Where are the healthcare system’s priorities?

One of the core questions in this national committee concerns which role the cantons play. The cantons often see themselves in multiple roles, ranging from owners, operators, financial backers, regulators, supervisory and approval authority all the way to that of mediation board and arbitrator in the event of disputes. The way I see it, the cantons need to concentrate mainly on their role as regulator and system manager. Of course at the national level we’re also faced with the question of how the healthcare system is financed, specifically the artificial line drawn between financing provided for inpatient and outpatient care. These and other artificial distinctions of a similar nature create the wrong incentives for hospital management and it will be impossible to hold on to them forever.

Experience has shown us that hospitals are not giving serious thought to their environment nor to patients as recipients of healthcare services. Existing environmental analyses are frequently disregarded.

We all have high expectations of life and our health nowadays. Yet a high life expectancy doesn’t just hinge on medical care, people are largely responsible for taking care of themselves in the first place. Good nutrition and exercise cannot be the responsibility of the healthcare system. Additionally, other external factors such as clean water and hygiene, just to name two, are crucial to good health. Actual medical care only accounts for around 20 percent of the population’s wellbeing. Having said that, continued increases in life expectancies will not be free.

© 2017 KPMG Holding AG is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved.

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