A new Siemens Financial Services (SFS) analysis shows that medical costs in the UK are rising faster than Gross Domestic Product (GDP) - demonstrating that healthcare costs are escalating beyond the means to pay for treatment and care.
In response, new tech-driven approaches aim to boost efficiency and reduce demand through prevention and early diagnosis. Given high costs and budget constraints, specialist finance is increasingly used to make technology acquisition more accessible.
Current models of healthcare delivery are increasingly considered ‘not fit for the future’.
Different factors are putting pressure on the National Health Service (NHS) specifically: an aging population, subsidised healthcare for low-income citizens and those with long-term, complex needs; rising drug spending; expensive new treatments, such as biologics and gene therapies; workforce shortages; declining trust in state provision; insufficient funding for efficiency initiatives; lingering COVID expenses; cyber threats; rising energy costs; and inflation.
The cumulative legacy of those factors has to be managed urgently.
Health professionals are seeking to harness new ways of working and modern technologies to deliver better patient outcomes at a lower cost. Current practices are unsustainable and create pressure for the healthcare delivery models to change.
To illustrate the growing gap between the cost of healthcare and available financial resources, Siemens Financial Services (SFS) conducted an analysis of the gap between costs and capabilities.
The graph below illustrates that in the UK, healthcare delivery costs have grown over the last eight years, significantly in excess of the development of Gross Domestic Product. In addition, the pace of this cost growth has accelerated considerably beyond inflation.
The stark conclusion is that healthcare services are becoming increasingly unaffordable in the UK and beyond the affordability gap is widening, and reform is urgently required.
To illustrate the widening gap between healthcare costs and healthcare resources, Siemens Financial Services (SFS) created an index of healthcare spending to compare with indices of inflation and GDP. GDP is an indicator of resources available for healthcare spending, whether for state/ taxation-derived healthcare systems or those structured on health insurance policies. Index comparisons cover the eight-year period 2016-2024. Sources: OECD; National Departments of Health; Willis Towers Watson; AON; Mercer Marsh; National Statistical Institutes
Technology for reform
Technology is widely seen as key to healthcare reform. As McKinsey notes, Digital and AI investments provide health systems with opportunities to address the many challenges they face.
Transformative technology fits into two main categories. On the one hand, there is medtech itself, where the digitalisation of medical equipment enables, for instance, joined-up patient record access and management, and remote consultation.
On the other hand, there is the rise of the ‘smart hospital’ which allows for optimised workflows to improve staff deployment, reduced waste, streamlined patient flow, shortened recovery times, and lower energy costs.
The issue is that the NHS – as well as private healthcare organisations – do not want (and often cannot afford) to tie up or ‘freeze’ funds in the capital cost of acquiring transformative technology, however powerful its business case. This is where the power of financial services comes into play.
In other words, financial efficiency is as important as technological efficiency. If former capital costs can be converted into operating costs (by harnessing third-party capital), then healthcare organisations can transform without tying up their financial resources.
For instance, energy efficiency can be financed by harnessing future savings in a flexible financing structure.
Enabling investment
New generation technology is essential to improve efficiency and reduce operational and energy costs within the healthcare sector.
However, the very technologies that are being installed to increase efficiency and effectiveness in healthcare are also those that contribute to the cost of healthcare delivery, because of their capital cost of acquisition.
Addressing these concerns, specialist financing for healthcare technology investment is playing a key role in bridging the growing gap between resources and demand, where expert financiers draw from their knowledge to tailor the most suitable financing structure for each organisation’s needs.
Specialist finance plays a vital role in supporting private clinics, which in turn helps ease pressure on the NHS. One example is Marris Medical, a new diagnostics clinic in London. The clinic’s approach to healthcare delivery eases access to care and reduces costs and wait times – especially in pain management, where waiting times are not consistent, and sometimes much longer than referral-to-treatment targets.
Marris Medical is offering high-quality diagnostic imaging, as well as an ‘office-based laboratory’ for a range of minimally invasive procedures. To optimise efficiency, Marris Medical is committed to using the latest, high-resolution equipment for all MRI examinations. All devices contain the latest software that allows for high-quality imaging with an up to 73% boost in scan speed. Financing from Siemens Financial Services (SFS) and equipment from Siemens Healthineers was therefore integral to the clinic’s launch in the UK.