Conclusions - Necessity: the mother of innovation

Creating a low-cost, high-quality healthcare system requires action and high-quality execution across a wide range of areas. This becomes particularly challenging once systems move from a focused approach, for example only offering high-volume surgery, to population health management.

Partner and Chairman

KPMG in the UK


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Some challenges

In an increasingly global world, payers and providers will come under pressure to ensure patients have access to prestigious facilities and high-cost medical equipment. In many cases this may add more cost than value. How to manage these expectations remains a significant challenge.

This problem may become even more difficult to manage when the low-cost system is operated by an existing provider positioned in a premium part of the market. There is a danger of cannibalizing their own customer base or of the low-cost brand damaging their existing reputation. In non-health industries from airlines to mobile phones, companies have found successful models to manage high and low-cost product lines.

There is a market failure in some growing middle income country private health services, in which most services are paid for out-of-pocket and insurance coverage, if any, is very limited in the range and depth of benefits packages include. Further, when regulation of private provision is ineffective, it results in consumers being on their own in terms of assessing the quality of health services and products on offer, such as medicines, and perhaps even in determining the credentials of healthcare professionals.

In this market, private providers often signal quality by high prices, new overbuilt facilities, expensive technology, brand name pharmaceuticals, specialist doctor credentials and academic posts. They also make much of their income from margins on ‘buy and bill’ sales of drugs and devices or on unnecessary diagnostic testing, particularly if they own these facilities. They profit highly from marketing unnecessary or low value services to low risk clients. In this market, the big question is the feasibility of making an offer of low-cost, high-quality healthcare commercially attractive, what business strategies have succeeded, and what feasible policy/regulatory conditions can help to make this happen in countries that cannot regulate credibly or afford universal coverage with comprehensive benefits packages.

While there is a large emerging middle class population, many countries still have a very large number of extremely poor people with limited access to healthcare. There is already a serious problem of a brain drain from services for the poor to those for the more affluent, an issue that could be at least as big a problem as migration. The providers of these systems need to be aware of the potential damage they could do to the wider healthcare system and the risk of regulatory action as a result. This risk may be reduced where low-cost models also operate programs for the poor and have an explicit social mission.

Finally, in some countries the issue of corruption will have to be dealt with head-on. This includes addressing corruption in procurement, as well as patronage in the recruitment of staff, unofficial payments to doctors and other practices that undermine the reliability and financial probity of the system.

Providers operating in both premium and low-cost markets must successfully manage their reputation, product lines and brands to avoid cannibalizing their own customer base.


In isolation, the individual building blocks for creating a low-cost, high-quality healthcare system are already fairly well understood. One issue, however, is that some aspects seem counterintuitive and contradict firmly held beliefs about how to run a hospital or a health system.

Factors that seem to separate the successful operators of these low-cost systems from the rest:

  1. Mobile first – phone or web
  2. Asset light
  3. Team based working with new roles
  4. Centralized specialist work
  5. Networked providers
  6. Use mobile care and telemedicine
  7. Patient focused, primary care based
  8. Coordination between providers
  9. Hybrid public and private models
  10. Community involvement in the design of services
  11. Devolved and high quality management
  12. Information technology as a backbone of the system
  13. Encourage transparency
  14. Tackle corruption.

As with many elements of health system design, it is crucial to consider the local context, regulatory environment and other characteristics of the local market and it may therefore be difficult to replicate successful models without significant experimentation and adaptation.

Looking forward, we expect to see more innovation and challenges to accepted ways of running a health system and in what patients expect from it. The big risk to traditional providers is that expectations will rise faster than they can keep up – this is when revolutions happen. Those that cannot adapt could be swept away. The potential for bad decisions and in particular for copying existing, unaffordable models from the West is very great, but so is the opportunity to create services and business models that change the face of healthcare.

Necessity: the mother of innovation

This report explores the challenges emerging health economies face in delivering high-quality, cost-effective care.

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