Download a study on internet impact in business designs for the health sector

UNIVERSIDADE TÉCNICA DE LISBOA
INSTITUTO SUPERIOR TÉCNICO
“A STUDY ON
INTERNET IMPACT IN BUSINESS DESIGNS FOR THE HEALTH
SECTOR”
CARLOS MANUEL VALENTE QUITERIO SIMÃO
(Licenciado em Engenharia Electrotécnica e de Computadores)
Dissertação para obtenção do Grau de Mestre em
“Engenharia e Gestão de Tecnologia”
Orientador
Doutor RUI MIGUEL LOUREIRO NOBRE BAPTISTA
Constituição do Júri
Presidente: Doutor MANUEL FREDERICO TOJAL DE VALSASSINA HEITOR
Vogais: Doutor PEDRO LUÍS DE OLIVEIRA MARTINS PITA BARROS
Doutor PEDRO FILIPE TEIXEIRA DA CONCEIÇÃO
Doutor RUI MIGUEL LOUREIRO NOBRE BAPTISTA
Agosto 2001
Master Dissertation
Abstract
Title: A study on Internet impact in business designs for the health sector
Name: Carlos Manuel Valente Quiterio Simão
Master course in: Engineering and Management of Technology
Oriented by: Rui Miguel Baptista (invited auxiliary professor)
Concluded proof at: August 2001
Health care as become one of the most largest and dynamic industries, in terms of job
creation, innovation and expenditure. There have been impressive achievements in
improve health quality of populations, life expectancy and universal convergence. There
remains however recurrent concerns regarding the adequacy of resources and the way
they are currently used. How best to increase the equity, efficiency and effectiveness of
health care.
Internet emerged in the last years as a new robust interactive channel, supporting all the
characteristics to be used as a self-service long distance channel, and as enabler of
closer relation between business partners. Being highly interactive and offering global
reach it allows real time answers to consumers requests, all over the world.
Internet introduction in the health care sector, although likely, has been a slow process,
much slower that among other industries. Although technology concerns did exist, as well
as a strong height in the role of human relations, institutional barriers are commonly
pointed as a major reason for Internet slow adoption.
This new health web-enabled environment, e-health, is pushing medicine practice into an
information supported, patient-centred and just-in time global market activity. The full
impact in traditional health economy, is still to be measured. Nevertheless it has already
changed the balance of power among health sector players, modifying the rules of
operations for the entire spectrum of those involved. Including consumers, health
providers, managed care organisations, pharmaceutical entities, medical equipment
manufacturers and suppliers, telecommunications operators, technology developers and
integrators, consultants, health funders, insurance companies, and policy makers.
Through a literature review of traditional business models and Internet impact among
other sectors, as well as by analysing the health market structure, and the present impact
of Telemedicine in developed and developing markets, like the US and EU, it’s aim to
understand Internet’s impact in the health care sector. Namely in enabling the access to
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better services through lower costs, and in changing the balance of power among sector
players, driving to new business practices.
Key-words: e-health, Internet, business models, Telemedicine, legislation.
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Resumo
Título: Estudo do impacto da Internet nos modelos de negocio, do sector da Saúde.
Nome: Carlos Manuel Valente Quiterio Simão
Curso de Mestrado em: Engenharia e Gestão de Tecnologia
Orientador: Rui Miguel Baptista (professor auxiliar convidado)
Provas concluídas em: Agosto 2001
A industria da saúde tem-se afirmado como uma das maiores e mais dinâmicas da
actualidade, em termos de criação de emprego, inovação e despesa. Alcançaram-se
melhorias impressionantes na qualidade de saúde das populações, no aumento da
expectativa de vida, e na convergência para padrões de saúde universais. No entanto,
preocupações recorrentes como a adequação dos recursos e a sua correcta utilização,
ou como promover a igualdade e o acesso a serviços de saúde mais eficazes, continuam
a existir.
Paralelamente, nos últimos anos, a Internet assumiu-se como um novo canal de
comunicação para massas. Robusta, com cobertura global e altamente interactiva,
oferece condições para ser utilizada como um canal “self-service” de longa distancia. Um
facilitador de relações, com largo impacto entre parceiros de negócio.
A introdução da Internet no sector da saúde, embora esperada, tem sido um processo
lento. Muito mais lento do que em outras industrias. Embora a actividade da saúde se
caracterize por fortes relações humanas e presenciais, bem como algumas preocupações
tecnológicas tenham existido e continuem a existir, as barreiras institucionais e
legislativas são normalmente apresentadas como o maior entrave á lenta adopção da
Internet.
Apesar disso, em muitos países a saúde vive já um ambiente “web-enabled”, que está a
conduzir a pratica da medicina na direcção de uma actividade global, suportada na
informação, centrada no paciente, e com relações “just-in-time”. O impacto global na
economia da saúde ainda esta por medir. Apesar disso as mudanças no equilíbrio de
poder e nas relações entre os intervenientes do sector, já são visível. Afectando
consumidores, prestadores de serviços, entidades da industria farmacêutica, fabricantes
de equipamentos, operadores de telecomunicações, entidades gestoras, seguradoras e
governos.
Através de uma revisão de literatura focada na realidade de países desenvolvidos e em
desenvolvimento, como os EUA e os parceiros da Comunidade Europeia, serão
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consideradas as alterações decorrentes da introdução da Internet em outros sectores,
analisadas diferentes estruturas do mercado de saúde, e avaliado o impacto da
Telemedicina na prestação de serviços e cuidados de saúde. Com base nesta
metodologia, pretende-se compreender e avaliar o impacto da introdução da Internet no
sector da saúde. Nomeadamente na dinamização do acesso a melhores serviços a mais
baixo custo e nas alterações causadas nos modelos de negocio e relações entre os
intervenientes do sector.
Palavras-chave: e-health, Internet, modelos de negocio, Telemedicine, legislação.
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Acknowledgements
To my mentor, Professor Rui M. Baptista, for is objective guiding and support.
To all those whose contribute to this dissertation, by sharing opinions and experiences,
have been fundamental.
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Table of Contents
Abstract.................................................................................................................................. 2
Resumo................................................................................................................................... 4
Acknowledgements ................................................................................................................. 6
Table of Contents ................................................................................................................... 7
Index of Figures...................................................................................................................... 9
Index of Tables ..................................................................................................................... 11
I.
CHAPTER I - INTRODUCTION.................................................................................. 12
I.1.
Health markets - General overview......................................................................... 14
I.1.1.
I.1.2.
I.1.3.
I.1.4.
I.1.5.
I.2.
US Health Sector......................................................................................................................................... 16
EU Health Sector ........................................................................................................................................ 17
Demand – Offer relation............................................................................................................................ 20
Health expenditure ...................................................................................................................................... 21
Market trends............................................................................................................................................... 26
Internet - General overview..................................................................................... 28
I.2.1.
I.2.2.
I.2.3.
I.2.4.
I.2.5.
I.2.6.
I.2.7.
Technology issues....................................................................................................................................... 29
M-Internet .................................................................................................................................................... 30
Legislation.................................................................................................................................................... 31
Products and services................................................................................................................................. 32
Costs and prices........................................................................................................................................... 34
E-commerce and business designs........................................................................................................... 38
Sector impacts ............................................................................................................................................. 42
Research Questions ........................................................................................................... 45
II. CHAPTER II – TELEMEDICINE ................................................................................ 46
II.1. Changes in the Market Structure ............................................................................ 46
II.1.1.
II.1.2.
Health Providers ..................................................................................................................................... 48
Telecom Operators ................................................................................................................................. 49
II.2. Telemedic ine Initiatives........................................................................................... 52
II.2.1.
II.2.2.
II.2.3.
Life Signs Monitoring............................................................................................................................ 53
Remote Consulting................................................................................................................................. 54
Electronic Medical Records.................................................................................................................. 54
II.3. Costs and Benefits ................................................................................................... 54
II.3.1.
II.3.2.
Patients Satisfaction............................................................................................................................... 55
Profitability.............................................................................................................................................. 57
II.4. Market Trends ........................................................................................................ 62
II.4.1.
II.4.2.
II.4.3.
II.4.4.
III.
Market Development Stage .................................................................................................................. 62
Driving Forces......................................................................................................................................... 65
Barriers to Change.................................................................................................................................. 65
Political implications ............................................................................................................................. 69
CHAPTER III – INTERNET IN THE HEALTH SECTOR....................................... 72
III.1. Changes in the Market Structure ............................................................................ 73
III.1.1.
III.1.2.
III.1.3.
III.1.4.
E-health Consumers ............................................................................................................................... 74
E-Health Providers ................................................................................................................................. 76
Insurance Companies ............................................................................................................................. 77
Telecom Operators ................................................................................................................................. 79
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III.2. E-health Initiatives.................................................................................................. 80
III.2.1.
III.2.2.
III.2.3.
III.2.4.
III.2.5.
III.2.6.
III.2.7.
III.2.8.
III.2.9.
Online Health Information.................................................................................................................... 81
Online Support Groups.......................................................................................................................... 83
Remote monitoring of Chronic Conditions........................................................................................ 84
Online Consultation............................................................................................................................... 84
Online Continuos Medical Education................................................................................................. 85
Online Contact Centres.......................................................................................................................... 86
Electronic Medical Records.................................................................................................................. 87
Electronic Procurement ......................................................................................................................... 89
Health Portals .......................................................................................................................................... 91
III.3. E-value proposition for Pharmaceutics Industry..................................................... 91
III.3.1.
III.3.2.
III.3.3.
Online Drugs Advertising..................................................................................................................... 93
Online Prescription................................................................................................................................. 94
E-Pharmacy ............................................................................................................................................. 96
III.4. Costs and Benefits ................................................................................................. 100
III.4.1.
Potential assessment proposal............................................................................................................102
III.5. Market Trends ...................................................................................................... 105
III.5.1.
III.5.2.
III.5.3.
III.5.4.
IV.
Market development Stage .................................................................................................................105
Driving Forces.......................................................................................................................................107
Barriers to Change................................................................................................................................109
Political implications ...........................................................................................................................111
CHAPTER IV – DISCUSION AND CONCLUSIONS.............................................. 115
Glossary.............................................................................................................................. 121
References .......................................................................................................................... 122
Appendices ......................................................................................................................... 125
Appendix A: EU, health sector market structures........................................................... 126
UK Health Sector...................................................................................................................................................126
French Health Sector.............................................................................................................................................127
Denmark Health Sector.........................................................................................................................................128
Swedish Health Sector ..........................................................................................................................................130
Portuguese Health Sector......................................................................................................................................130
EU financing models and sources of funding:..................................................................................................132
Appendix B: Telemedicine Technology............................................................................ 134
Appendix C: E-health services assessment....................................................................... 136
Appendix D: Portuguese E-health Experiences. .............................................................. 139
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Index of Figures
Figure 1. Health sector structures. Source: Béresniak and Duru (1999).................................. 15
Figure 2. Typology of the public health care systems in the EU. Source: Palm et al (2000). ..... 18
Figure 3. Per Capita expenditure on health, 1998. Source: OECD Health data 2001............... 23
Figure 4. Government legislative role. Source: Westland and Cark (2000). ............................. 32
Figure 5. Digitised Vs. Physical products................................................................................ 33
Figure 6. Commercial transaction variables. .......................................................................... 34
Figure 7. Internet impact in price structure variables.............................................................. 35
Figure 8. E-Commerce costs. ................................................................................................. 36
Figure 9. Traditional supply chain. Source: Bovet and Martha 2000....................................... 38
Figure 10. Value net. Source: Bovet and Martha 2000............................................................ 39
Figure 11. Internet business models matrix............................................................................ 42
Figure 12. Internet business value chain. ............................................................................... 43
Figure 13. Internet disintermediation. .................................................................................... 44
Figure 14. Telemedicine players............................................................................................. 47
Figure 15. Hospital - 3 rd part connections............................................................................... 48
Figure 16. Telecom operators’ migration, along Telemedicine the value chain........................ 50
Figure 17. Chronic patients / LSM – Business model.............................................................. 53
Figure 18. Telemedicine expectations..................................................................................... 55
Figure 19. Costs variation...................................................................................................... 59
Figure 20. Challenges facing Telemedicine............................................................................ 70
Figure 21. Health sector evolution. Source: Lere 2000............................................................ 72
Figure 22. How health players use Internet............................................................................ 73
Figure 23. E-health consumer. Source: Deloitte (2000)........................................................... 74
Figure 24. Insurance companies, positioning opportunity....................................................... 78
Figure 25. Changing values in physician-patient relation. ...................................................... 81
Figure 26. Yhaoo health major categories. ............................................................................. 82
Figure 27. Support groups value position. .............................................................................. 83
Figure 28. Creating and using EMR in UK. Source: Bell (2000)............................................. 88
Figure 29. E-procurement...................................................................................................... 89
Figure 30. Pharmaceutics information E-channels. Source: Hudson (2000) ........................... 94
Figure 31. Pharmaceutical supply chain. ............................................................................... 96
Figure 32. E-disintermediation in pharmaceutical Supply Chain. ........................................... 96
Figure 33. Pharmacy2U Internet site...................................................................................... 97
Figure 34. Online Pharmacy purchase in the UK. Source: Tucker (2000). .............................. 98
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Figure 35. UK health sector. Source: Béresniak and Duru (1999)......................................... 126
Figure 36. France health sector. Source: Béresniak and Duru (1999). .................................. 128
Figure 37. Denmark health sector. Source: Béresniak and Duru (1999)................................ 129
Figure 38. Swedish health sector. Source: Béresniak and Duru (1999).................................. 130
Figure 39. Portuguese health sector. Source: Béresniak and Duru (1999)............................. 131
Figure 40. Saudeglobal, Portuguese health portal................................................................. 139
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Index of Tables
Table 1. Health market players. Source: Empirica and WRC (2000)........................................ 14
Table 2. Interoperations among health care players. Source: Empirica and WRC (2000)......... 14
Table 3. Health expenditure growth. Source: OECD Health data 2001.................................... 23
Table 4. Health spending as % of GDP. Source: OECD Health data 2001............................... 24
Table 5. Major changes in health Providers business.............................................................. 49
Table 6. Survey of Telecoms positioning in Telemedicine. Source: Telemedicine Today (1996).51
Table 7. Major changes in Telecoms health business.............................................................. 52
Table 8. Country’s Telemedicine development stage. Source: Wright (1997)............................ 65
Table 9. The “four C’s” model............................................................................................... 80
Table 10. Aventis e-procurement expectations. Source: Bradley (2000). .................................. 89
Table 11. Aventis expected benefits from his value net. Source: Bradley (2000)....................... 90
Table 12. Total expenditure on pharmaceutical goods % Total expenditure on health. Source:
OECD Health data 2001. ....................................................................................................... 92
Table 13. Major changes in Pharmacy business...................................................................... 99
Table 14. E-health services, assessment frame. ..................................................................... 103
Table 15. E-health related risks............................................................................................ 103
Table 16. E-health related expenditure. ................................................................................ 104
Table 17. Financing Models in EU countries. Source: Empirica and WRC (2000)................. 132
Table 18. Financing Models in EU countries. Source: Empirica and WRC (2000)................. 132
Table 19. Support Groups. ................................................................................................... 136
Table 20. Online CME. ........................................................................................................ 136
Table 21. Contact Centres.................................................................................................... 137
Table 22. EMR. ................................................................................................................... 137
Table 23. E-procurement. .................................................................................................... 138
Table 24. Risk assessment tolls............................................................................................. 138
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I.
CHAPTER I - INTRODUCTION
Internet emerged in the last years as a new, global, robust interactive channel, supporting
all the characteristics to be used as a self-service long distance tool, and as enabler of
closer relation between business partners. Being a rich source of multimedia information,
highly interactive and 24 hours available, it allows real time answers to consumers’
requests. These characteristics help Internet players to develop a mass-market-of-one,
where it’s possible to identify consumers’ habits and preferences, tailoring the offer
according to individual profile in micro market segmentations.
The impact in social, cultural and business habits continuos to grow, as more and more
PC usage becomes vulgar and new access technologies like WAP, PDA or WebTV
emerged. Across most sectors, companies have made a move into Internet business,
benefiting from venture capitals expectations and enthusiasm. But on a euphoric,
technological driven market, a growing number of bankruptcies suggest some immaturity,
and a need to join good technological innovations with appropriated business plans, that
can balance the speed of technological obsolescence with short time payback.
Slywotzky (1995), states that a company capacity to generate value is not in her
technology, but in the way it’s business design is able to manage people and technology
to gain opportunities and generate profits. As well as products, business designs go
through cycles from growth through economic obsolescence. Customer priorities, more
than any other variable (even technology) has a natural tendency to change, while
business designs tend to stay fixed. When company’s business design and customers
priorities fail to match, value migration begins to occur, leading to new business designs
while killing fix and slow to adapt, traditional ones. Internet is a killer of slow, physic,
isolation and market-share business models. The drivers are now connectivity, speed and
personalization, McKnight (2000). Customer priorities go to convenience, reliability and
customisation. Low price, quality and information are now assumed values.
In some sectors like healthcare, the traditional height of presential human relations, as
well as process specific needs, have delayed the Internet revolution. But even here,
customer priorities have change and probably will continue to. New business designs,
involving none traditional partners, are imposing them selves, in horizontal and vertical
areas like home care, health information, continuous medical education (CME), drug
prescriptions, health monitoring, second opinion and even in remote operation guidance.
From a stage of presential, one-to-one personal relations, highly dependent on
individualised experience and evaluations criteria’s, health has evolve into more objective
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means of diagnosis that had less to do with the subjective experiences of the particular
physician, and more to do with the extent to which a patient typified a particular pattern of
disease. This shift from a high reliance on direct communication to a reliance on
information in the practice of medicine, has been technologically supported by the gradual
introduction of new diagnose tools and methods of recording and quantifying physiologic
conditions.
Presently health care is one of the largest sectors in OECD countries, and accounts for
over 8% of GDP on average. Only in EU, OECD statistics state that 370 million citizens,
consult 5 times a year, one of the 800 000 practising medical doctors. In turn this
generates activity for the 200 000 EU pharmacists, the 1.6 million nurses and also for
many clinical-test laboratories and hospitals. In such a perspective and considering it’s
impact among other sectors in information exchange, work-flows and business partners
relations, Internet his expected to have a strong impact in the organisation of health care,
and by virtue of the volume of its transactions, in e-commerce numbers.
However, even though health care promises to be a very significant part of Internet activity
on par with its 8% share of GDP and in line with the growth of home care and consumers
empowerment, it is to be expected that its integration will be a slow process. The main
reason lies in its specific reimbursement structure where third party payers (be it private
insurance, a NHS or social security), play an important role between the patient (the
buyer), and the health care provider (the seller). As a consequence each transaction is
subjected to a set of complex rules and regulations not only differing among countries or
states but also depending on circumstances (e.g. emergencies). Moreover, because of
the specific consequences of a breach in privacy in health care transactions,
confidentiality and security issues require special measures, eventually only found in the
online financial activities.
To better understand all the key variables involving the introduction of Internet into the
health sector, in the following pages a general overview and assessment of the current
state of US and EU health markets, will be conducted, focusing in drivers barriers and
expectations. This will be followed by a general overview of Internet development stage,
and changes caused by its introduction on other market sectors. The chapter will end by
defining this work research question, and proposing a methodology to evaluate risen
hypotheses.
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I.1. Health markets - General overview
The health care sector comprises a complex mix of institutions, business, professionals
and users, whose role and formats, changes among countries, according to politics,
economics, social and cultural factors, as well as technological development. Empirica
and WRC (2000) suggests that health care systems can be fragmented in five levels:
MAIN TYPE
Direct heath care
providers
SHORT DESCRIPTION
These are individuals or organisation that
provide direct health care services, such as
diagnosis, treatment and rehabilitation.
Consumers
These are the users of health care services. It
includes the general citizen with health care
interests.
These are the services that provide initial and
ongoing training for professionals, and those
that provide general information.
-
These are the organisations that pay for the
health services that are provided to
consumers.
-
Educational
and
support services
Purchasers
funders
/
-
-
Policy
administration
/
These are the agencies that manage the
overall health care sector and the various
players.
-
EXAMPLES
Office-based doctors
Health centres
Hospitals
Laboratory facilities
Pharmacies
Other
paramedical
/
sociomedical services
Patients and Families
Students
General Citizens
Medical schools
CME services
Information
and
other
support
services
for
professionals or consumers.
National
and
local
governments
Public
insurance
organisations
Private
insurance
organisations
Health Ministers
Local authorities
Various
other
public
agencies
Table 1. Health market players. Source: Empirica and WRC (2000).
All this players interact with each other at some level, which can include legislation,
information exchange, fee negotiation, payments, etc. These interactions are briefly
resumed in the following interoperation matrix:
Direct
heath
care providers
Consumers
Educational
and
support
services
Purchasers /
funders
Policy
/
administration
DHP
C
- Clinical
- Information
information
- Consultation
- Patient
- Treatment
referral/transfer
- Support
- Prescription
- Peer
support
ESS
- On-site
education
- Initial and CME
- Information
and
expert
support
- Health
information
- Remote
education
/
training
P&F
- Billing
- Payments
-
P&A
- Activity
reporting
- Notifiable
diseases
Claims
Paymentt
- Inter
agency - Activity
reimbursement
reporting
- Information
exchange
Table 2. Interoperations among health care players. Source: Empirica and WRC (2000).
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The type of players existing in each market and the established relations among them
defines the nature of the market. Béresniak and Duru (1999) propose two opposite
philosophies of players and flux combination, representing the public and private models:
Freedom of choice
Wages negotiation, ...
HOSPITAL
PHARMACISTS
Taxes
Lists inscription
POPULATION
GENERAL PRACTITIONER
PUBLIC SECTOR
Reimbursement
COMPANIES
SPECIALIST
Health check
Taxes
POPULATION
Insurance prize
Health
functions
Freedom of choice
STATE
Direct
Payment
HOSPITAL
SPECIALIST
Publicity
PRIVET INSURANCE
COMPANIES
PHARMACISTS
GENERAL
PRACTITIONER
PRIVET SECTOR
STATE - Rules implementation
Figure 1. Health sector structures. Source: Béresniak and Duru (1999).
Both models presume state intervention, with major differences in the providers
dependence and funding mechanisms as well as in access to care. In the first model,
health care is a public managed and owned service. It’s expected to find a strong
government control, intervening at the providers’ level, with strategic orientations,
management, wages negotiation, etc. The state has the financiers’ role, supported by tax
collection or other financing mechanism, and usually owns the facilities. In this specific
model consumers freedom of choice is usually limited.
On the second model, providers are mainly private institutions, with full management and
strategic autonomy. State intervention is limited to regulation activities to ensure service
and prevent/correct market failures. Eventually state co-financing of health care services
might occur, but private institutions, insurance companies, associations, syndicates, and
individuals now represent the gross of the financing mechanisms. The population power of
choice grows both in the capacity of selecting a provider, as well as in the possibility of
choice of financing models, (Béresniak, and Duru 1999). Usually there is a mix of both
models, with more or less predominance of one.
Palm et al (2000), state that the current forms of public social protection emerged in the in
the Industrial society context, with the initial model of mutual benefit societies of the 19th
and the first half of the 20th century. Public protection developed on the basis of two
models:
-
Compulsory Social Insurance. The first law instituting the principle of compulsory
social insurance was passed in Germany in 1881, and it make sickness insurance
compulsory for both workers and employers with related contributions based on
earned income. Protection was initially limited to wage-earners.
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-
National health services. This model was introduced in the UK in 1948, on the basis
of four essential principles: coverage of the whole population, universal protection
providing safeguards irrespective of the risk, a unified system supported in centralised
national administration, and uniformity of benefits, matching response to need.
All European countries have based the structure and funding of their health systems on
one of these two public approaches, with different further evolutions resulting from historic
and institutional developments of each country. While in Europe, the predominance is still
for the public sector model, in the US, private sector model has been adopted.
I.1.1. US Health Sector
In the US, Federal Government is responsible for defining health practice guidelines,
ensuring public health and safety, creating and disseminating public information, and
educating public about health. In his turn, each state, through his medical board, has the
power to adopt laws to protect and regulate health activities.
The federal government is one of the major providers of health care services through
institutions like the Department of Defence, the Department of Veterans’ Affairs and the
Indian health Service. The federal government is also a major insurer through Medicare
Medicaid and the State Children’s Health Insurance Program (SCHIP).
The US health insurance is a voluntary market. Coverage is found in both the public and
private sector, though public sector coverage is limited to particular categories of
individuals. The elderly (those age 65 and over) as well as disabled persons meeting
specific eligibility requirements receive coverage through the Medicare program. Some
groups of low-income persons are eligible for benefits through the Medicaid program (a
jointly-funded, Federal-state health insurance program) with eligibility and included
services varying significantly by state. Other public programs, such as the military health
system, provide insurance for some narrowly defined populations. Another example of
public coverage is state-sponsored high-risk pools. Risk pools provide insurance to
individuals who, as a function of pre-existing illnesses or conditions, have been denied
private insurance coverage.
Generally, only the basic and emergency care is fully covered under public insurance
plans. Other types of care require patients’ co-payment or the existence of a second
health insurance plan.
Private Insurer companies base their premium and coverage policy in patients’ risk
assessment tests. Private sector coverage includes those people who are ineligible for
public sector coverage, people who choose to supplement their public coverage with
additional private insurance, and people who choose to purchase private coverage
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despite being eligible for public programs. Patients can choose and manage their benefits,
directly (self-insured), through workers and syndicates associations or joining companies
health plans.
Since medical providers typically collect a co-payment from the patient and bill the
patient’s insurer for the remaining cost of the service, patient access to care (although not
limited as they can choose to support all expenses) might entail eligibility verification and
pre-service authorisation.
Health providers (professionals and/or institutions) are mainly in the private sector.
Directly or through associations, they established conventions with existing health plans,
defining levels of coverage and costs for each type of service.
Medical practice is regulated by states and federal laws. States regulate licensure and
practice issues, with criteria’s changing from state-to-state. Some states adopted a policy
of mutual recognition of health professionals, but in most cases if the practitioner chooses
to work in a different stage, another licence must be obtained.
Patients’ access to care in non-resident states is also conditioned to health plans
specifications.
I.1.2. EU Health Sector
Within EU, the organisation and delivery of health services and medical care have always
been considered a responsibility of each member country. Although since the Maastricht
treaty, the achievement of a social and health protection has been established as one of
the aims of the union, unions’ role should be of ensuring that the European environment is
supportive of optimal health promotion and protection, but with no direct intervention in
local policies.
The private or public nature and importance of financing and delivery of health care
services, varies among EU countries. Although most health care expenditure is public
sector originated.
Analysing EU health care systems, Palm et al (2000), proposed a model to group
countries public access to health:
Social insurance systems generally offer category-based protection. In Belgium, there are
two separated regimes: the first covering the whole population apart from the selfemployed and the second covering only the self-employed. In France, there are three
regimes: for employed workers and civil servants, for the self-employed and for farmers.
In Germany, those with incomes above a certain level are not subjected to compulsory
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Master Dissertation
insurance. In the Netherlands, those with incomes above a certain level are excluded from
the public system.
ACCESS TO HEALTH CARE
SOCIAL INSURENCE
REIMBURSEMENT
NATIONAL HEALTH SERVICE
BENEFITS IN KIND
CENTRALISED
DECENTRALISED
B
A
UK
E
P
F
D
IE
I
DK
L
NL
GR
FIN
SW
Figure 2. Typology of the public health care systems in the EU. Source: Palm et al (2000).
In the countries with social insurance, two systems for meeting medical costs may be
distinguished. One grouped comprising Belgium, Luxembourg and France, reimburses the
cost of health care services. The insured person has a free choice of health care provider.
In the other group, formed by Austria, Germany and Netherlands, the social protection
system ensures that the patient receives the care his state of health requires. In these
countries, the general practitioner behaves as a gatekeeper, he refers the patient to other
forms and levels of care.
In the countries with national health services, delivery of health care and ensuring its
access are managed by the state in a centralised or decentralised mode. Generally the
patient has no out-of-pocket payments to make except for any standard charges.
Coverage is usually universal, and most of these countries fund their systems from taxes
In some countries, access to specialists or higher levels of care, must be conducted
through a GP, that acts like a gatekeeper. This gets reword in a per-service fee or in percapita bases. The UK, aiming to control health expenditure and increase competition
among providers, established a especial philosophy of budgeting, where the GPGatekeeper, receives a budget according to his patients list, and manages that budget
contracting services to other providers (exams, hospitalisations, surgeries…).1
At the present, the bulk of health care provision and expenditures occurs within national
boundaries, however cross-border activity does exits. Empirica and WRC (2000), state
that the scale of cross-border care is quite small but suggest that the evolution for a single
1
Higher detail of some EU countries market structure can be found in appendices A.
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Master Dissertation
market will ease and encourage transactional health care with necessary implications in
political and financing mechanisms. Palm et al (2000), analysing two judgements of the
Court of Justice of The European Communities (cases Deker 1998 and Kohll 1998),
where the court decided that social security systems of patients countries should
reimburse medical services provided in another member state, pointed some major
reactions:
-
The press, standing for the consumer, welcomed these cases as a social
improvement for patients, a step forward in the right of European Citizens and a
positive advantage in the process of creating an internal market in health care.
-
Member states saw the court decision as encroaching their prerogative of organising
their protection and health systems in accordance with their own choices, operating
rules and criteria for access to treatment and quality of care. They questioned if the
rules of free movement of goods and provision of services enshrined in the treaty
would be applicable in the field of social security given the competence of the
member states in this domain. Most governments also feel that unrestricted access to
health care abroad would endanger policies for containing health expenditure, for
allocating resources effectively and for public health care.
-
Social security administrations considered that the exceptions created rise
administrative complications and legal uncertainty.
To Palm et al (2000), the importance of this two judgements, transcends the question of
cross-border care, affecting the relationship and balance between the economic freedoms
enshrined in the EU treaties which manage the internal market (and the health care
sector), and the basic principles of social protection (ensuring access to health care),
organised at a national level.
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Master Dissertation
I.1.3. Demand – Offer relation
Demand and offer articulation in the health sector does not obey to the common
economical roles. Health is not a common good able to be consumed, spent, exchanged
or re-sold. Health care providers in general terms, benefit from the privilege that most of
their clients, are reimbursed in their purchases, and have no reluctance in using it. Plus,
most consumers lack the information necessary for informed choice, (Oxley and
MacFarlan, 1994). As so, health demand becomes highly influenced by financial, cultural
and demographic factors, which can easily cross and even overlap. According to
Béresniak and Duru (1999):
-
Finance influence: Usually the basic health insurance programs don’t cover all health
expenses, driving population to private health insurance’s to obtain full indemnity and
risk cover. The intervention of an external financial mechanism, like a private health
insurance, changes the balance between supply and demand, causing that the
applied tariff doesn’t represent the real market prices. The consumers paid price will
decrease while increasing the producers collected price, resulting in an over
production and consumption, of health care.
-
Demographic influence. Demand for health care doesn’t have a linear distribution
among population. Population can be segmented in different categories, based on
consumption patters, with age and sex being major differentiation variables. Other
influence factors are associated with the planing and allocation of health cares
institutions and professionals, which is usually planed with base on simple indicators
like number of health professionals per capita, number of beds per capita, etc.
Although is presently recognised that this procedures are quite inefficient because
medical activity requirements change from country to country and even between
regions, their simplicity and easy of implement, justifies their large utilisation.
-
Cultural influence. Life behaviours with more or less exposition to risk factors, and
with different reactions when dealing with health problems can determinate illness
early detection and treatment. Higher classes are usually responsible for higher
demand of ambulatory services and less hospitalisation, in opposite to what happens
in disfavoured classes.
The fact that health demand is continuously growing is well documented and justified,
based on the development of medical knowledge as well as therapeutics and
technological improvements that results in a growing of life expectation and quality.
Nevertheless, Béresniak and Duru (1999), suggest the existence of an induced demand
situation in the health sector. The higher the offer the higher demand will be:
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Master Dissertation
-
The growth of health professional’s per capita works like publicity and incentives
health services consumptionby making them more available.
-
Competition promotes services diversification and reinforced care.
-
Health institutions, attract customers in the proportion of their capacity. Higher
capacity in a similar context means that the hospitalisation requirements will be lower.
-
Technological developments and information stimulates expectations.
-
Financial institutions. The higher the financier participation, less will be populations’
tendency to avoid health care consumption.
Although the considered induce demand, the driving factors can be found as goals in,
many countries health programs, when they imply an unnecessary growth in health
expenditure that doesn’t stand for health equity and efficiency, they became a problem.
I.1.4. Health expenditure
OECD classification of health expenditure is based on the following classes:
-
Personal health care services. These are services and goods that can be directly
allocated to individuals as distinct from collective health service, including: in-patient
care (hospitals and other institutions), home care, ambulatory care, prescribed and
non-prescribed drugs sold in retail outlets, personal health supplies, and therapeutic
appliances;
-
Services of prevention and public health. This item comprises services designed to
enhance the health status of the population. Typical services include: Vaccination
campaigns and programmes, expenditure on maternal and child health care,
expenditure on school health services, expenditure on occupational health care, other
prevention and public health;
-
Health administration and health insurance. This item comprises public and private
initiatives such as planning, management, regulation, and collection of funds and
handling of claims of the delivery system. Formulation, administration co-ordination
and monitoring of overall health policies, plans, programmes and budgets.
Administration, operation and support of social security funds covering health
services. Administration and operation of private social insurance. And others.
-
Investment into medical facilities. This item comprises procuring, constructing and
installing new facilities and machinery and equipment. Feasibility studies,
architectural, legal, installation and engineering fees. Construction expenditure. And
others.
-
Expenditure on health related functions. This item comprises expenditure on health
education and training. Including public and private provision of education and training
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Master Dissertation
of health personnel, including the administration, inspection or support of institutions.
Expenditure on health research and development. Including clinical trials and
laboratory investigations. Expenditure on pharmaceutical industry research and
development, including develop new compounds to correct somatic or psychic
dysfunction or to improve individuals’ state of health. And others.
These expenditures can be either public or private financed. In most countries health care
financing mechanisms are becoming increasingly complex with a wide range of
institutions involved. At least a basic subdivision of public and private financing exists in
most cases, and the level of standardisation across countries of even these basic
categories of public and private funding, is in general low. Similar designations of a “social
insurance”, “mutualités”, etc., often describe different institutional arrangements and
financing regulations, making dificult international comparisons. Overstepping de intercountry different role of institutions, OECD (2000) proposes a frame for grouping and
hierarquize health financiers:
A - General Government
A.i - General Government excluding social security funds
A.i.i - Central Government
A.i.ii - State/provincial government
A.i.iii - Local/municipal government
A.ii - Social security funds
B - Private sector
B.i - Private social insurance
B.ii - Private insurance (other than social insurance)
B.iii - Private households (out-of-pocket spending)
B.iv - Non-profit institutions (other than social insurance)
B.v - Corporations (other than health insurance)
C - Rest of the world (externalities on the financing of health care)
Each of this has is own funding sources, could they be tax collection / deduction, intergovernmental transfers, insurance prizes, fees, etc 2. Empirica and WRC (2000) points
that although consumers pay indirectly for health care trough their contribution to tax
revenue and/ or their payment of insurance premiums, in all countries they also have
some level of direct expenditure on health care as well.
For many OECD countries, the capita growth rate of health spending is higher that GDP.
In 1980, health spending in OECD countries averaged 6.9% of GDP. This value grew to
8.3% in 1998, revelling a small increase from 8.2% in 1993.
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GROWTH OF EXPENDITURE ON HEALTH (1)
Real per capita growth rates (2)
1980-1992
1993-1998
Health
spending
GDP
Australia
Austria
Belgium
Canada
Czech Republic
Denmark
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Italy
Japan
Korea
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
2.7
1.9
3.6
4
..
0.7
4.4
3.6
2
1.9
..
3.3
2.3
3.6
3
..
4.3
..
2.4
2.5
3.5
..
4.9
4.7
0.6
3
3.6
3.6
5.3
1.4
2
1.8
1
..
1.4
1.3
1.8
1.2
1.1
..
0.9
3.1
2
3.2
7.2
3.9
0
1.6
0.6
2.1
..
3
2.3
1.1
1
2.5
1.9
1.9
OECD average (3)(4)
3.1
1.8
Health
spending
Health spending as % of GDP
GDP
1980
1993
1998
4.3
2.2
3.5
1
2.2
1.8
0.5
1.4
2.7
3.1
0.9
3.3
5.1
1.1
3.4
4.9
2.3
..
1.9
3.7
6.8
6
4.1
2.3
0.9
2.8
7.5
2.5
2.3
3.2
1.9
2.3
2.3
2.3
2.9
4.3
1.6
1.4
2.3
3.4
3
7.6
1.8
0.9
3.3
3.3
0.9
2.6
1.4
3.6
5.8
3.1
3
2.6
0.6
2
2.8
2.9
7
7.6
6.4
7.1
3.8
9.1
6.4
7.4
8.8
6.5
..
6.1
8.4
7
6.5
..
5.9
..
8
6
7
..
5.6
5.4
9.1
7.3
3.3
5.6
8.7
8.2
7.9
8.1
9.9
7.2
8.8
8.3
9.5
9.7
8.1
7.7
8.3
7.6
8.5
6.6
4.7
6.3
6.2
9
7.2
8.1
6.4
7.3
7.3
8.6
9.4
3.7
6.9
13.2
8.6
8
8.6
9.3
7.1
8.3
6.9
9.4
10.3
8.4
6.8
8.4
6.8
8.2
7.4
5.1
6
5.3
8.7
8.1
9.4
6.4
7.7
7
7.9
10.4
4.8
6.8
12.9
2.9
2.6
6.9
8.2
8.3
Notes:
1. Total expenditure on health includes public and privet spending
2. The gross domestic product deflator has been used for both series
3. OECD average excludes the Czech Republic, Hungary, Korea, Mexico and Poland
4. Unweighted average
Table 3. Health expenditure growth. Source: OECD Health data 2001.
The United States is still, by far, the largest spender on health care, not only as a
percentage of GDP but also on a per capita basis.
PER CAPITA EXPENDITURE ON HEALTH, 1998, IN US$ PPPs(1)
EXPENDITURE PER CAPITA IN US$ PPPs
4 500
4 000
3 500
Total expenditure
Out-of-pocket expenditure
3 000
2 500
2 000
Notes:
1. Purchasing power parities
(PPPs ) provide a means of
comparing health spending
between countries on a common
base.
PPPs are the rates of currency
conversion that equalise the cost
of a given ‘basket’ of goods and
services in different countries.
1 500
1 000
500
KO
RE
A
HU
NG
AY
PO
LAN
D
ME
XI
C
TU O
RK
EY
UN
ITE
D
SW STAT
ITZ ES
ER
LAN
D
NO
RW
AY
GE
RM
AN
Y
CA
N
A
LU
XE DA
MB
UR
NE
TH
G
ER
LAN
DS
DE
NM
AR
ICE K
LA
ND
AU
ST
RA
LIA
BE
LG
IUM
FR
AN
CE
AU
ST
RIA
ITA
LY
JAP
A
SW N
ED
EN
IRE
LAN
UN
D
ITE
F
D K INL
ING AND
DO
M
NE
W
ZE
LAN
PO D
RT
UG
AL
GR
EE
CE
CZ
EC
H R SP
EP AIN
UB
LIC
0
Figure 3. Per Capita expenditure on health, 1998. Source: OECD Health data 2001.
2
Higher detail on EU financing models and sources of funding, can be found in appendices A
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Master Dissertation
Switzerland was the second highest spender per capita on health care in 1998, followed
by Norway, Germany, and Canada, each with more than $2,200 expenditure per capita.
At the bottom end of the range, six countries (Czech Republic, Hungary, Korea, Mexico,
Poland and Turkey) each spent less than $1, 000 per capita on health care.
HEALTH SPENDING AS % OF GDP BY SOURCES OF FUNDS 1998
Australia
Austria
Canada
Czech Republic
Denmark
Finland
France
Germany
Iceland
Ireland
Italy
Japan
Korea
Mexico
Netherlands
New Zealand
Norway
United Kingdom
United States
Average (5)
Total Health
spending (1)
Public
spending (2)
Private collective
spending (3)
Out-of-pocket
spending (4)
8.6
8
9.3
7.1
8.3
6.9
9.4
10.3
8.4
6.8
8.2
7.4
5.1
5.3
8.7
8.1
9.4
6.8
12.9
6
5.8
6.5
6.5
6.8
5.3
7.3
7.8
7
5.2
5.5
5.8
2.4
2.6
6
6.3
7.1
5.7
5.8
1.2
0.9
1.3
0.0
0.1
0.2
1.1
1.2
0.1
0.8
0.8
0.3
0.6
0.1
2.0
0.5
0.2
0.3
5.1
1.4
1.3
1.5
0.6
1.4
1.4
1.0
1.3
1.3
0.8
1.9
1.3
2.1
2.6
0.7
1.3
2.1
0.8
2.0
8.2
5.9
0.9
1.4
Notes:
1. Total expenditure on health includes public and privet spending
2. Public expenditures includes government tax-funded and social security programmes
3. Privet Collective spending includes private voluntary, private mandatory social insurance, plus charity
and direct employer benefits
4. Out-of-pocket spending comprises over-the-counter and cost-sharing (co-payment, co-insurance)
5. Unweighted average
Table 4. Health spending as % of GDP. Source: OECD Health data 2001.
US Public expenditure on health as a share of GDP is similar to that in other OECD
countries but covers only part of the population. Private out-of-pocket payments in the US
are greater than in other OECD countries on a per-capita basis. However, the out-ofpocket share of health care funding has decreased in the United States over the past
decade, while it has been rising in many other OECD countries, including Canada,
Germany and several Nordic Countries.
As health expenditure grows, health systems become under increasing pressure to
improve their performance. The excess of health care inflation over the GDP was an
important argument underlying policies of budgeting and price control. These mechanisms
can actuate over demand, offer or both, using a limiting/coercive approach or a better
practice incentive methodology. Coercive solutions over supply, are the most commons,
due to the difficulty to limit demand, and the specificities of incentive policies. Palm et al
(2000) groups coercive supply mechanisms into four categories:
-
Direct short-term controls (budget capping, staff cuts and wages restrictions, price
and quality controls).
-
Indirect short-term controls (medical profiles, changes in remuneration structures).
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Master Dissertation
-
Miscellaneous incentives and controls (hospital and medical equipment planning,
controlled high technology adoption, encouragement of alternatives to in-patient
treatment, gatekeeping).
-
Direct long-term actions to limit numbers of practitioners (numerus clausus or course
admission quotas) and institutions.
The imposing of health budget tend to shift more of the burden of health care funding on
to the patient. (out-of-pocket payments). The risk of such control options resides in
developing inequity in access to health services (although low-income groups can benefit
from special programs), growing waiting lists, less consumer satisfaction and inevitably
allowing some diseases to develop having higher costs in later treatments.
Alternatives suggested by Jacobzone and Lenain (2000) point for the development of
incentives to alter both the consumption and prescription behaviour avoiding wasting, as
well as developing less expensive information and accompaniment mechanism. Palm et al
(2000), state that most health sector reforms have been trying to attain a more rational
allocation of resources introducing competition among the actors of the health care sector.
As patients are given the freedom of choice, providers and insurers (purchasers of care),
being allowed a prospective budget are incited to adopt practices to provide quality care at
a minimum cost. Health costs structure is highly complex, with a large number of potential
sources and externalities, but its knowledge is determinant to define priorities in health
planing, based on decease impact. Usually health costs are split in two major sets: direct
and indirect costs.
Direct costs represent treatment costs: consultations, medicaments, hospitalisations,
transportation expenses, professionals-time, equipment and facilities amortisation, etc.
Indirect costs focus on the patient social role, and sickens implications. It involves
qualitative as well as quantitative measurements, and presumes a social vision based on
potential productivity. Working interruption period, consultations lost time, family
dislocation, children care, etc. A proposed methodology to estimate indirect costs is based
on the GDP value divided by population. This would give the medium value of annual
individual productivity, used to evaluate the inactivity period. This method fragility resides
in the fact that activity level is not a population constant. Other methodologies include
intangible effects like life quality, emotional losses, etc. The evaluation of this is usually
supported in market research inquiries, but the difficulty of measuring this usually
excludes it from the equation.
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Master Dissertation
I.1.5. Market trends
Obviously, countries have different types of health care systems, and therefore have
different challenges to address. Nonetheless, there are common features in implemented
or in course reforms, which can be grouped in three main categories, (Imai et al 2000):
-
Equity. Populations should have access to some minimum level of health care, and
treatment should be based on need for care rather than on income.
-
Efficiency. Quality of care and patient satisfaction should be maximised at minimum
cost. Taken actions include introducing technological advances that improve
productivity. Developing competition among health care providers, change provider’s
incentives, etc.
-
Cost control. With economic growth slowing and health care "consuming" a growing
share of GDP, countries have try to keep medical spending within reasonable limits.
These reforms are on going process with different levels of success. Accepting the
differences that exist among each country market trends go in the direction of higher
communication and interaction efforts. These include:
-
Encouragement of co-ordination and continuity of care. As well as better co-ordination
between the hospital and non-hospital sectors, there have also been efforts in most
countries to improve co-ordination within the non-hospital care sector itself. This has
been a driving force for the development of electronic patient records and for the
establishment of electronic communication networks for the various players in the
sector.
-
Enhancement of the GPs role. In some countries the GP’s role has traditionally been
the focal point of primary care services, often acting as the gatekeeper to specialists
and hospital care. In other countries however there has been a blurring of roles
between GPs and specialists and GPs role is under-developed. Most countries are
trying to enhance the role of the GP to ensure both continuity of care trough having a
personal/family doctor and to give a clearer gatekeeping role to the GP for costefficient reasons. These developments place the GP at the centre of communications
in the ambulatory sector and as the main point of contact with hospital services.
-
Development and expansion of home care services. In line with the ageing of the
population and the efforts to reduce hospital costs, there have been efforts in a
number of countries to develop and expand home care services. These include
professional services from community nurses as well as more practical support from
home helps. These developments are increasing the importance of health care
communications to and from the home.
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Master Dissertation
-
Promoting a more rational/efficient allocation of resources. Achieve a more rational
allocation of resources is fundamental to control health expenditure. Traditional cost
control measures can compromise equity in access to care, increasing waiting lists
while decreasing patient satisfaction. Ambitious reform projects sought to attain this
rationality/efficiency by introducing competition among health sector players.
-
Developing a cross-border health policy. Given the growing trend for patients to seek
treatments abroad, it is important to examine and assess the positive and negative
repercussions and the financial implications both for patients and for the health care
systems. Introducing mechanisms in a bilateral or multilateral framework to pool,
equalise or fix costs allowing national health purchasers to contract foreigner
practitioners/health institutions. Convergence aspects should include mutual
recognition, criteria’s for good professional practices, rules on equivalence of medical
services, etc.
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Master Dissertation
I.2. Internet - General overview
Internet development started in 1969 by the hands of the US Defence Department. As it
become available to the public, it rapidly spread around the world. By 1990 the World
Wide Web came up. WWW is a system based on hypertext connections that allows
graphic navigation over the Internet. His impact was so strong that Internet is usually
confused with it. The number of users triggered, new products and services came up, and
killer applications like e-mail, changed radically business designs in every activity sectors.
For 2005 previsions are for 1.114 million access connections (PC, IP phones, WebTVs,
others), 922M users, spending $2,712 billions in Web shopping, (Kee et al 2000).
Although these values reveal opportunities, they also represent a tremendous threaten.
With a strong trend for e-commerce to grow, global market becomes more and more
relevant especially when consumers decide to buy “out side” in foreigner sites. Novais
(2000) pointed that in 1999 71% of Portuguese e-commerce shopping was developed
within foreigner sites. Other concerning factors include the fact that 80% of world
countries don’t have basic telecommunication’s infrastructure, emergent markets in
Europe have Internet access costs 12 times higher that US, many businesses and
consumers are still wary of conducting extensive business over the Internet because of
enforcement of contracts, liability, intellectual property protection, privacy, security, etc.
US and dollar domains Internet companies and commercial transactions. Plus, new
entering companies looking to gain from Internet opportunities, necessarily have to deal
with reshaped traditional problems (Novais (2000) and Alves et al (1999)):
-
Logistics, customers expect to get their products fast.
-
Linguistics, to reach world market it’s necessary to communicate, in language as well
as by knowing local habits and costumes.
-
Technologic actualisation, there are many different access technologies with different
versions, different programming languages requiring different technologic platforms.
-
Visibility, after creating a site, he still worth’s nothing if it’s unable to attract customers.
On the other hand, facilitators’ aspects do exist:
-
More money is being moved by electronic means, than by “hand”.
-
The effort to catch up with US, made EU to reduce access costs and promoting
Internet use.
-
Euro creation allowed for a large European market (with internal independence from
dollar or yen) and a monetary unit strong enough to compete with US dollar.
-
Business is becoming increasingly web-based: Intranets for knowledge management,
extranets for B2B, Internets for B2C and so on.
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Master Dissertation
Although classified as a global and anarchic network, without legal or any other type of
barriers, fact is that Internet does present functional, entering and using barriers. Access
technologies, speed, price, as well as politic and cultural patterns, reflect them selves in
the profile of Internet users and e-commerce buyers. Expressions like info-excluded, infopoor or info-rich are commonly used to describe access to the new communication
systems and particularly Internet, (Alves et al,1999).
The first frontier in this qualification emerges at the country level, reflecting the poverty or
richness of each country in what concerns education, technological development and
accessibility to new communication tools. Ireland is a European reference in what
concerns awareness of information technology importance and effort to skip geographic
physic and virtual isolation. In 1999 Irish government started a development plan to place
Ireland in the centre of new economy world. Investing over 80 million dollars to implement
a communication network that will ensure a boundrate of 25 Gbps, to the US and 24 other
European cities. Internet represents an opportunity for countries economic development.
On this context, reduce of Internet access costs, as well as dissemination of access
technologies works like an investment.
A second split arises inside each country or region, involving small communities or
individuals that strive to develop knowledge and implement technological mechanisms
that bring them closer to the information society.
I.2.1. Technology issues
Internet has grown independently from technologic platforms, both at the infrastructure
level and in the access equipment. Any network or equipment able to speak TCP/IP could
be connected. This “openness” that allow it to grew so fast and widespread, is now a
barrier for its consolidation and development in the direction of more demanding services.
The Net is a type of “patchwork-quilt”, build upon fragmented and many times immature
technologies, to which backbone operators, terminal equipment and applications
developers greatly contributed with their wide spread and competitive technological
orientations.
The impossibility to control customer’s technologic platforms obligates services and
application to be compatible with multiple environments and access channels. Usually this
results in lower number and poor functionalities. Application developers must deal with
these trade-offs between robust and secure versus openness and accessibility to larger
markets. Product life cycle and payback are also affected, once products don’t get to
achieve maturation, being fast substituted, in the effort of producers to remain in the
technological vanguard.
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Local access technologies vary from traditional personal computers accessing Internet by
analogue telephone lines, coaxial cable network, ISDN networks, DSL, fibber optic lines,
Ethernet data networks, etc, trough WebTV’s, mobile IP phones, personal digital
assistants (PDA), and other portable and wireless devices. Backbone operators manage
access technologies and traffic demand, but no quality of service is yet possible. Traffic
flows, directions, and volumes shift in a chaotic manner trough time. Network performance
depends on traffic patterns recognition and bandwidth optimisation mechanisms. In short,
there is no shortage of technology for accessing the Internet, though many of these
alternatives may not be economically viable in particular areas and for particular types of
use.
I.2.2. M-Internet
Mobile usage is increasing across the globe. In some European countries mobile phone
connections outstrip fixed lines. USA is a bit behind, due to the existence of multiple not
inter-connective mobile phones standards. But the adoption of a single third generation
standard will allow them to catch up. Kee et al (2000) predicted that within three years, it
will exist more wireless connections to the Internet than fixed, and the majority of ecommerce transactions will terminate or originate on a wireless device. Fixed e-commerce
is limited by access to wired PC. The services and applications used in mobile ecommerce will attract users by emphasising the immediate and accessible nature of
mobile communication. Its commodity “anytime, anyplace”, is simplicity “one click to get
in”, its mobility, and especially its personalization “your own profile”. Highly personalised
content and services are expected to differentiate and add value to services. Present
opportunities can be segmented in three main categories, goods, services, and
information. Services presently available include banking, ticketing, stocks, and gaming.
Goods cover shopping vending and trading opportunities, and information includes paidfor information and advertising.
Opposite to fix network scenario, Kee et al (2000) suggest that B2C mobile e-commerce
will generate greater revenues and a large number of users than B2B. The ARPU for B2B
applications will generally be higher than those for B2C clients, but the higher number of
users of consumer-focused services will ensure that they create greater revenues. Just in
Europe, the mobile e-commerce market is estimated to be worth Euro 23 billion in 2003.
KPMG (2000), sustains that organisations wishing to transact in e-economy, particularly
telecom and ISP, must be aware that the scope of change required is considerable as
both existing revenue and cost models become redundant. Telecom operators,
particularly mobiles, are moving from voice centric network carriers, to data and customer
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centric services providers. In the process, third party relationships are being developed
both with technology partners and applications and content providers. This three players
should review their own business models into a mutual, fast to reply, flexible, cost efficient
and allowing multiple sources of cross revenues. Share on traffic and application use
revenues, as well as technology costs and implementation risk responsibilities must not
be out of scope.
Kee et al (2000) and KPMG (2000) suggest five aspects that will ensure m-Internet
success:
-
Mobile phone users number are already higher than PC’s number, and it’s becoming
part of their every day lives.
-
Working teams more and more have mobility requirements.
-
Services are becoming more personalised and location dependent (e.g. car traffic,
news, etc)
-
A more robust authentication mechanism, places m-Internet in a privilege position for
electronic payment services.
-
Availability. Always on, wherever and whenever you want it.
Complexity of products, pricing structures, and equipment suitability (display, keyboard…)
are the most important barriers for m-Internet development. But market trends go
precisely in the direction of overcoming these aspects. In Japan and several European
countries, mobile prices are already at or below fixed prices. Many applications will use
voice-to text translation to minimise the issues regarding the usability of keypads (e.g.
SMS, e-mail). And to avoid user confusion over the many new applications available,
targeting efforts are being made to offer personalised application according to user
requirements.
I.2.3. Legislation
“Internet business, while potentially reaching a global market place trough the
interconnectivity of the Internet, must also operate within at least one nation’s legal and
political boundaries.”
Lee W. McKnight 2000.
The lack of a predictable legal environment governing transactions particularly for
international commercial activity where are concerns about enforcement of contracts,
liability, intellectual property protection, privacy, security and others, have caused
businesses and consumers to be cautious. Many companies and Internet users are
concerned that some governments will impose extensive regulations on the Internet and
electronic commerce. Potential areas of problematic regulation include taxes and duties,
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restrictions on the type of information transmitted, control over standards development,
licensing requirements and rate regulation of service providers. These types of
commerce-inhibiting actions already are appearing in many countries.
Westland and Cark (2000), suggest that governments should promote global, low cost
access to the Internet, encouraging companies to introduce new technologies and
services, as well as developing self-regulation agreements, wile allowing competition and
consumer choice to shape the marketplace.
The innovation speed in Internet requires business models to evolve rapidly to keep pace
with the speed of change in the technology. Government attempts to regulate shouldn’t be
technology-specific,
but
in
the
direction
of
providing
local
or
international,
Intergovernmental agreements. Allowing for a stable business environment, as well as the
INTERGOVERNMENT
LOCAL
GOVERNMENT
Financial Issues
Legal Issues
?customs and taxation
?'Uniform Commercial Code'
?electronic payments
?intellectual property protection
BUSINESS
INTERACTION
?privacy
?security
Market Access Issues
?telecommunications infrastructure
?content
?technical standards
Figure 4. Government legislative role. Source: Westland and Cark (2000).
fulfil of punctual sectors specific legal aspects, ensuring competition, protect intellectual
property and privacy, prevent fraud, foster transparency, support commercial transactions,
and ease dispute resolution (Westland and Cark 2000).
I.2.4. Products and services
Choi et al (2000), suggests that e-commerce products and services can be grouped in two
major types. Those how can be digitised and delivered via networks, and those that can’t,
but still can be promoted, selected and bought electronically and delivered physically, this
way improving the efficiency of the business transaction. This leaves no product or service
out.
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Commercial advantages of digitised P&S are easy to find, they can be promoted,
searched, compared, paid, … electronically. But also they can easily be stocked,
changed, reproduced and maintained (virtually they can last forever). This long term
existence is one of the problems that e-commerce companies have to deal. If a product
can last a life long it represents a one-time sell. Update, features enhancement, and
fashion, are possible weapons to maintain the established commercial relation based on a
strategy of planed obsolescence. Product customisation and renting policies (e.g. ASP)
are other possibilities.
Other heavy problem is intellectual property. Although encrypted keys for copy /
reproduction control are possible, they are not 100% effective, and represent added cost.
• Information goods
(paper based products,
software applications,
games, audio, video, TV
maps, photos, ...)
• Consulting services
• Payments
• Interactive services
(education, telemedicine, …)
• Money
• Paper based
(contracts, signatures,…)
• Voting / Elections
• Auctions
• Recruiting
• Security services
• ...
• Food
• Pharmaceutics
• Closes
• Furniture
• Buildings construction
• Cleaning services
•
• ...
• ...
DIGITISED
P&S
EASILY DIGITISEBLE
P&S
HEAVY PHISICAL
DEPENDENT P&S
Figure 5. Digitised Vs. Physical products.
Choi et al (2000), point that Internet e-commerce initial success has been in categories,
where it has clearly identifiable benefits over conventional retail. This categories have one
of two characteristics: consumers want to chose from a larger selection than traditional
retail can offer (e.g. books, CD’s…), or the commodity and lower price charge of some
electronic P&S (e.g. stocks, airline tickets…). The most attractive categories for Internet
shopping include:
-
Products: Groc eries, clothing, books, music, electronic goods (audio, video,
computers), software, white goods, furniture, sporting goods, plants and garden
supplies, motor vehicle parts and pharmaceutical supplies.
-
Services: Insurance, stocks, mutual funds, loans, tickets (travelling, entertainment…),
and information.
Interactive products and services (e.g. games, Telemedicine, education…) is one area in
expansion in online business, that benefits from digitised P&S characteristics, while
preventing from typical problem like timeless and copyright property.
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I.2.5. Costs and prices
Choi et al (2000), suggests that before e-commerce most companies build their brands
and developed products, around feelings, words, pictures, sounds and even smells that
were appealing to consumer’s emotions. This special image they create allowed them to
purchase a premium value over competition’s offer. At this stage, Internet promotes the
rational buy, by encouraging consumers to passionless compare prices and product
characteristics. The efficiency of Internet search and compare tools, as well as the
aggregation of offer (e.g. B2B vertical portals), places consumer in a privileged negotiating
position, which can be challenging for companies, as it can exposes companies cost and
price strategies threatening their public image, (one of the reasons why companies may
choose to create a new brand for online business). Anyway threaten isn’t only for online
business. As consumers gradually became aware of price structures, they might also use
this information when dealing with traditional off-line business.
QUALITY
Shape and Colour
Delivering time
STATUS
FUNCTIONALITY
Availability
Search and compare
CREADABILITY
EMOTION BUY
Off-line
RATIONAL BUY
On-line
Figure 6. Commercial transaction variables.
Traditionally, consumer doesn’t know products costs. Eventually the entrance of a new
market player enables him to learn more about costs. Pereira (2000) suggests that when
buying a product consumer resistance point is usually established by comparing the
desired product characteristics (both embodied and disembodied) whit the cheapest one
in that category. This gives him a first estimate of product cost, and allow evaluating if the
premium is justifiable, namely in what concerns product quality and company’s credibility.
Westland and Clark (2000) pointed that this risk premium (buying from a known brand or
from a start-up) is in extinction in the Internet. For most products and services it’s easy to
find help from experts (both individual as institutional), who freely inform about companies,
products or services, quality aspects, market trends influencing prices and so on.
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Choi et al (2000) suggests that the knowledge of a company or sector price strategy, limits
the profit margins (e.g. telecommunications), weakness consumers loyalty to brands (e.g.
white products), and transform products and services in commodities as consumers
become unable to differentiate offers (e.g. bank services). And most of all, might develop
a feeling of have been previously deceived, paying excessive premium values.
Raw materials
PRODUCT
COST
Price
Labour work
Logistics (stock, distribution,..)
Marketing (direct, scope, …)
Sales
SECTOR
TYPIC
MARGIN
PROFIT
PREMIUM
Internet
Impact
Risk
Status
Figure 7. Internet impact in price structure variables.
Companies striving to increase profits and run from price wars have to look for alternative
strategies to place their products, passing by:
-
Price alignment with consumer patterns, e.g. quantity and scope discount.
-
Dynamic prices, changing from market to market. Although an Internet price is usually
globally visible, different prices can be justified with expedition or local labour costs.
-
Bundling offers. The price structure of a particular product becomes less visible inside
a package, and consumer’s attention is driven to the global package benefits.
-
Quality increase and emotional aspects communication.
-
Consumers loyalty. Dilute or transfer products cost to future services.
Fact is that the idea that e-commerce reduces costs is commonly accepted between most
parts. But what costs does it reduces, and are they really reduced or just shift to different
players or less visible spendings? At this point of e-commerce development many market
trends exist and need to be explored. Off-line companies moving to online using the same
or different brands. Online companies opening off-line shops to promote them selves and
reducing consumers’ acquisition cost. Working online or off-line, with different prices or a
single price. Different prices for the same online offer, based on criteria’s like
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personalization (e.g. Amazon), etc…One initial path that seamed to turn out to be a death
end was to reduce on prices and charge for on-site publicity.
In the consumer beaver, Pereira (2000) and Novais (2000), identify three common
patterns:
-
Consumers search, compare, select and end up buying products online.
-
They purchase online but pay off line
-
After selected the product online, buy them in a physical store.
Main reasons for these might come from fear to pay online, or products might involve
physic characteristics, which requires specific physical interactions. Also e-consumers
usually are time exigent. If delivery time is not satisfactory they might prefer buy in the
physic store. In 1998 purchases with online payment rise to $11 billions. Purchases online
with payment of line overcame $15 billions, and buying decisions with off-line purchase
based on online research result in over $51 billions, Novais (2000).
Switching cost
Waiting cost
Search cost
Consumer
acquisition cost
Raw materials
cost
Labour cost
Sales cost
Logistics cost
(inventory, property,site…)
Figure 8. E-Commerce costs.
By placing the necessary information online, even the third scenario (where consumers
complete a transaction in traditional way) can be profitable, as consumers arrive knowing
which product they want and ready to buy it. This reduces companies’ sales costs, but
doesn’t really eliminate them. Instead it transfers it to the consumer side, to search costs,
which simultaneously benefits from reduces, thanks to Internet search and compare tools.
Waiting costs that didn’t existed in the B2C traditional market (although exists in B2B),
now appear, forcing companies to optimise their logistic and distribution systems which
will have to answer faster. But this to can be compensated by property costs (e.g.
warehouses space) reduction and just in time production.
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Although e-commerce reductions do occur, seems that new cost emerge, replacing old
ones, and a lot of costs shift between parts, demanding some careful when associating ecommerce with cost reduction, which will vary from business to business.
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I.2.6. E-commerce and business designs
Slywotzky and Morrison (1997), consider that a company’s business design is composed
of four strategic elements:
-
Customer selection. To whom is the company’s business best suited, or best able to
serve.
-
Value capture. How does a company get rewarded for the value she creates for her
customers.
-
Differentiation/Strategic control. Differentiation reflects the company ability to protect
its profit stream.
-
Scope. Which activities should a company developed inside and which to outsource.
What products and services should she offer to customers, and how this will influence
differentiation.
Each dimension is dynamic and linked to all others. For a business to succeed, they all
must be aligned with customer’s most important priorities. These variables didn’t change
with Internet introduction. Nevertheless, by enabling consumers to easily search,
compare, select and buy products, Internet as empowered the consumer, to define what
should be produced, when, where and at what price, Sinha (2000). This empowerment as
forced companies to move from the old product-centric, market share approach into the
new customer centric and profit–oriented environment. Slywotzky (1995) suggests that the
idea of gaining market share so that profitability would follow, is death. Now companies
need to understand what is most important for customer, where can they make some
profit, and then how can they gain market share in that space.
Bovet and Martha (2000), integrate these business trends, and Internet disintermediation
capacity, in what they call a value net, which reflects a new form of market alignment that
is fast, flexible, aligned with and driven by new customer choice mechanisms. In a
traditional business design, materials flow slowly and sequentially down the supply chain.
Information moves, often erratically, back up the chain. Time delays and multiple handoffs attitudes are endemic. As a result, supply and demand rarely matches.
Plant
Demand
Procure- Inbound Manufa- ware- Distributor Channel Product
Forecasting ment
logistics cturing housing storage
sales
delivery
CUSTOMER
Figure 9. Traditional supply chain. Source: Bovet and Martha 2000.
In contrast, a value net forms it self around its customers. It captures their real choices in
real time and transmits them digitally to other net participants.
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PROVIDERS
COMPANY
CUSTOMERS
Figure 10. Value net. Source: Bovet and Martha 2000.
Pathways for information and material flows are aligned with service needs and priorities
of distinct customer segments. The company creating the value net surrounds the
customer, controlling his touch points, accessing customer information, nurturing the
relationship, and managing satisfaction through digitally integrated service and support. At
the same time, it manages its network of providers to ensure rapid and cost-efficient
fulfilment. Eventually suppliers might directly provide products and services to customers,
thus bypassing traditional layers in the value chain.
Despite that value nets could have emerged in traditional business channels, Internet has
speed them up, by working like a disintermediate tool and allowing players on either end
of a value chain to easily reach each other, bypassing costly distribution layers.
Traditionally the information technologies used to enable electronic commerce have only
existed in expensive and closed environments. During the last decade many industry
groups and trading partners have invested in technology to handle the routine paperwork
of buy/sell transactions from purchase order to payment (e.g. EDI). Now that connectivity
using the Internet is potentially universal, prices have tumbled, and capabilities have
grown, no business is isolated from either the opportunities or the threats of the online
world. In many cases the use of new technology is vital for an organisation just to remain
competitive. At the same time, opportunities for global business, and new or improved
business with partners, are available at affordable costs. In all cases, optimum use of all
capabilities depends on organisations being able to examine and implement new ways of
work and of doing business.
Business transactions over the Internet are commonly classified in the following
categories:
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-
B2B. “Business-to-Business”, concern commercial transactions between companies,
which can be split in two major groups, direct goods to manufactures and indirect
goods. Direct goods are those purchased for inclusion in the products of the
purchasing manufacture, and have been the focus of the EDI industry. Indirect goods
are those bought not for use in a saleable product, but for support services (e.g.
stationary, maintenance and repair supplies).
-
B2C. Business to consumer, concern commercial transactions involving a product
supplier and the final customer (e.g. bank transactions…). Many B2C e-commerce
applications are either direct or indirect substitutes for existing conventional
commerce services, but offering advantages for consumers, such as low price,
convenience, easy of use and personalised services. Consumers security concern in
online transactions, technology understanding, and delivering process are usually
pointed as barriers for B2C growth.
-
C2C. Consumer-to-consumer, characterises commercial relation between individuals
on the Internet (e.g. auctions). Promoters of this type of relation will profit from
publicity and eventually from percentages over each commercial transaction. C2C
height in e-commerce transactions is almost irrelevant compared with previous two.
-
C2B. Although not common, it represents the opportunity for consumers to provide
services to business. Tele-work over Internet, or discussion forums where infomediary
selects and compiles provided information are examples of this.
These classifications reflect the players involved in Internet transactions with relation to
their demand or supply role and legal structure. But they do not consider each player
activity sector. So a second classification, vertical or horizontal, is usually crossed with
these previous ones, to better specify the type of each transaction.
A third crossing classification is suggested by Shah (2000) who splits e-business models
into two broad categories:
-
Traditional business models modified to work on the Web;
-
New business models, related with new activities that have evolved along with web
environment, and that probably wouldn’t be viable without Internet.
Under the traditional model approach, some of the most identifiable Web presences are:
-
E-retailers (e.g. Amazon.com). Who have taken the common concept of retailing and
targeted, to online consumers. A major challenge in implementing this model is
ensuring the ability to service large volumes of individually small orders on a timely
and cost-effective basis. Others include the ability to develop a user-friendly
mechanism to purchase and complete on-site transactions.
-
Advertising and Subscription. Business based on this model try to generate traffic and
charge consumers or advertisers for their content. This is a highly saturated area, and
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venture capitalists are moving away from funding content-based sites as simple traffic
is tending to be a poor indicator of potential future revenue. This seams to confirm
Slywotzky (1995), statement that market share is no longer a insurance of profitability.
-
Trial-for-free. Typical cases are software and games companies who attempt to
attract and retain customer attention through free products, with the aim of selling
complementary products. Shah (2000) suggests that this area of the market is
becoming saturated with niche players with offerings for almost any application.
Critical for success with this model is the ability to quickly generate user acceptance
within the marketplace.
Beyond the traditional backbone services such as Internet service providers, Shah (2000)
considers that the Web has developed a new line of intermediary companies, with new
type of business models (e.g. online financial services) which could not exist out of the
net:
-
Auction sites (e.g. eBay), attempt to match consumers with sellers going to the
highest bidder, using a greater audience. This his the type of business that wouldn’t
succeed outside Internet due to the cost-prohibitive of getting a large volume of
consumers and sellers together across a region such as North America.
-
Reverse auctions (e.g. Priceline.com) where the goal is to match products or services
with requested prices by consumers. This model has moved heavily into the
business-to-business arena with manufacturers setting up intermediary sites with
suppliers. This model's success is dependent on its ability to generate a critical
volume of transactions and thus fees.
-
Infomediaries have also grown to occupy a niche on the Web, providing services or
information while gathering customer information to be passed on as market data. By
offering information and support to consumers, these companies are able to gather
and sell customer profiles to businesses. While this is not an entirely new concept, the
scope of customer reach would not have been possible without the Internet.
Others new models include entertainment, Web hosting and ASP. When comparing
different models and wining trends, Shah (2000) suggests that opportunities appear to be
shifting away from dot-com traffic sites and Internet service providers and more towards
supporting e-business intermediaries and application service providers.
Considering the previous proposals of businesses models categories, and crossing them
all, a three dimension matrix can be developed to place and classify each internet
business.
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C2C
B2C
B2B
VE
RT
.
MTBM - Modified Traditional Business Model
NIBM - New Internet Business Model
VERT. - Vertical
HOR. - Horizontal
INFOMEDIARIES
MTBM
NIBM
Figure 11. Internet business models matrix.
I.2.7. Sector impacts
Every firm in every industry will eventually use Internet in a part of their business design
(market research, distribution, marketing…). But that doesn’t mean that all business has
what it takes to succeed in the Internet, nor that they will equally react to his introduction.
Internet had and still has different impacts among each activity sector, with some business
always depending on extra-net tools and process.
Telecommunications
Traditionally telecommunications core business has been selling bandwidth. The market
was vertically segmented having major players including equipment developers, installers
and operators, with traditional product/service-centric business designs. Over the years,
for many operators business designs didn’t change much. Internet came up as another
way to promote traffic. The real break trough came up with World Wide Web. Hundreds of
start-ups realise the potential of Internet in areas like information, marketing, management
and distribution channels, new digital products, etc, and positioned them selves in that
market. It took a while for most operators to understand what was happening, and then
was too late for them to develop know-how and strong brands to compete. Still they have
advantages. A big economic power, infrastructure control and a deep know-how in
telecommunications technology, allow them to implement a value migration into
information and contents provider business, by vertically integrating emergent companies
in that areas.
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Value Chain
Importance:
Client
Contents
Portal
Infra-structure
Equipment
Figure 12. Internet business value chain.
Bandwidth sale still is the gross profit generator, but more and more it’s becoming a
commodity. Recognising the actual power of the customer, the fight is to “win the
customer”, by being able to give him what he wants. The client is now on the heart of the
value chain. He is “demand-pull”. Equipment provider, independent of the technology
involved, as well as the infra-structure/backbone provider (operator) are seen as
commodities. Benefiting from their privileged position operators already made the move
vertically, for contents aggregators, centralising and controlling the access point of the
customer. And if equipment seems out of scope, especially for its decreasing importance,
contents don’t. Most telecommunications’ operators have established partnerships
ensuring the exclusivity of strategic contents to reach their customers target.
To operators, profits came up from differentiate services in a competitive market, increase
customer loyalty and reduce churn, traffic stimulation, sharing e-commerce revenues, new
services fees (ASP - Application Service Providers), advertising (banners) and direct
marketing, content royalties, etc
Manufactures and Retail
Retail companies, are intermediaries between manufactures, small businesses and
households consumers. Traditionally they work on a base of $ for m2, supplying local
access to consumers, logistic and eventually sales/distribution capacity. Their presence in
the value chain markup manufacture’s products, and might delay product delivery.
Through the Internet, manufactures gained direct contact with their final customers.
Nevertheless, diversifying their business by moving to the Internet, not being their natural
core business, will bring challenges and eventual threatens. Among other risks, it will
require a restructuring of internal operation mechanisms and logistics, it will be
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endangering a possible market share of customers’ fidelized to the retailer, a channel
conflict can emerge if it’s choose to maintain both approaches. Over all a negative impact
on manufacture brand can occur.
Depending on the product mix and characteristics, and the logistics capabilities of the
manufacturer, he will be able to make that move, eliminating retail channel steps that do
not add value, delivering directly to his final consumers.
Internet Channel
Producers
/ Grocers
Retailers
Final
Customers
Figure 13. Internet disintermediation.
To the small businesses, and even the individual consumer, this represents lower prices,
more choices and more efficient, just-in-time delivery systems, directly to the store/home.
On the manufacture side, Internet allows the development of international shopping malls
that will erase national boundaries for businesses and households around the world. Plus
the elimination of some wholesalers and retailers will trigger other changes. It will:
-
Reduce cycle time for getting products to consumers.
-
Increase sales through lower prices by eliminating markups introduced by wholesalers
and retailers.
-
Higher margins will allow more and faster improvements in the products
-
Provide additional revenue for the manufacturers to cover the higher shipping and
handling cost of smaller shipments delivered more frequently to consumers
Adding to these, the shipping and handling traditionally performed by the retailers’
distribution centres can shift to the manufacturers’ plants, benefiting from lower cost of
labour in the exporting countries.
Repercussions also occur in the transportation industry. Among others:
-
Large shipments from manufacturer to distribution centres will be converted into
smaller shipments delivered directly more frequently to consumers, both businesses
and households, having consequences in the kinds of transport used.
-
The elimination of intermediate steps (wholesalers and retailers) will probably increase
traffic.
-
Consequently transport companies with global scope and capacity to offer totally
integrated distribution solution will benefit most from these changes.
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Research Questions
Through this chapters it has been made a general overview of major trends, driving forces
and barriers of the health sector and Internet. It has been seen that, provide better health
care services (efficiency), with lower cost (cost control) and easier access (equity) is a
common goal in most countries health policy. Independently from their economic, social or
technological level. It has been discussed Internets’ role and capacity to disintermediate
business relations and in empowering consumers. Which consequently as leaded to the
development of new services and business models across different activity sectors.
The movement of the Internet into the health sector is commonly called E-health. In the
following chapters, this work aims to understand if Internet introduction changes the
business relations among health sector players. Plus, if the new environment of webenabled health services promotes health equity and efficiency, while reducing health
expenditure.
In trying to answer these research questions, it’s intent to identify who will use e-health,
what will it be use for, who are the entering and living players in the new business
designs, and how will they make money in e-health.
From others sectors reality and health care specificities, it’s expected that Internet will
enable information access, improving consumers’ knowledge while promoting betteroriented and easier access to health care services. It will enable a reduction in service
costs, shifting expenditures from treatment to prevention.
To evaluate the raised hypotheses and consequent implications, a literature review has
been done, focusing on health sector traditional relations and the changes introduced by
Telemedicine, which is seen as an inter-medium stage to e-health. An assessment of the
current offer of e-health products and services was develop, aiming to understand the
business models behind new and reshaped services, as well as their implication in health
expenditure and patients satisfaction. An analysis of US and EU e-health market context
was conducted to identify drivers and barriers, recognising their leading positions in this
field.
A Global overview of Internet and the health sector was conducted in chapter I. Chapter II
focuses on Telemedicine contributions to the health sector. A differentiation between what
his Telemedicine and e-health is done in Chapter III as e-health is introduced and
assessed. The document finishes with the evaluation of the raised questions and
hypotheses, in chapter IV.
It’s not the aim of this work to look over pharmaceutical or telecommunications industry, or
into governmental policy, more than needed to analyse health sector context and eventual
cross relations.
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II.
CHAPTER II – TELEMEDICINE
Medical practice has been gradually moving from an experience-intensive science into
more objective means of diagnosis that had less to do with the subjective experiences of
the particular practitioner, and more to do with the extent to which a patient typified a
particular pattern of disease. This shift has been technologically supported by the
introduction of new diagnose tools such as the stethoscope, the thermometer and then
more and more sophisticated electronic methods of recording and quantifying physiologic
conditions (EKG’s, X-rays…).
Telemedicine is a multidisciplinary area that requires expertise from telecommunications,
health-care and information technology sectors. The American Telemedicine Association
defines it as “the use of medical information, exchanged from one site to another via
electronic communications, for the health and education of the patient or health care
provider and for the purpose of improving patient care”. Other definitions can be found,
having in common the application of telecommunication and information technologies to
health care activities and procedures to deliver medical information, decision mechanisms
and new treatment procedures. Other related terms such as telehealth and telecare have
also been used, although some authors (e.g. Wright 1997), suggest that they have a
different scope. Telecare covers the area of distance nursing and community support,
while Telehealth can be distinguished from Telemedicine in the sense that telehealth is
the provision of a service to those who are at a distance from the service provider, but
who are not necessarily ill or wounded. On the contrary, they are well and want to stay
that way by following healthy practices to avoid illness and disease.
In this work, Telemedicine will be used in a broad sense, covering telehealth and telecare
specialisation areas. It addresses specific needs like patient’s accessibility to health
treatments, decentralise formation and support to health professionals, continuos
monitoring and support of life systems, easy exchange of patients medical records, etc,
while raising the possibility of cost savings.
II.1. Changes in the Market Structure
Traditionally health cares activity involved, a short, well defined set of players. Although
their role could change among countries, in a high level approach it was possible to
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Master Dissertation
identify and differentiate consumers, service providers, funders, policy makers and
pharmaceutics industry.
In the new Telemedicine environment, with the entrance of new players and the
development and enhancement of services and methodologies, players’ power and health
care delivering process has been continuously changing. Wright (1997), states that
Telemedicine is being delivered by a variety of service providers, such as
telecommunication
operators,
equipment
manufacturers,
hospitals,
universities,
governments, information service providers and system integrators, often in alliances or
joint ventures.
Many Telecom companies are seeking alliances with providers’ groups (like hospitals and
clinics), as well as equipment suppliers and integrators. Small local companies, providers
of Telemedicine hardware and software, are striving to develop local networks with
medical centres, individual practitioners and patients. Larger equipment manufacturers,
such as IBM and GE, are forming independent regional networks, entering on what used
to be telecom business.
Traditional providers, like public or private clinics and hospitals, are faced with large
investments, and few ROI guaranties. Consequently they are reluctant to embrace them,
and most established Telemedicine programmes have been largely subsidised by
governments, either directly or indirectly.
Telecom Operators
ISP, ASP’s, ...
Providers 1
Health Professionals:
Doctors, nurses...
Providers 2
Health Institutions:
Hospitals, Clinics,
Laboratories, pharmacies…
Technology developers
and systems integrators
Consumers:
Patients, students
general citizens...
Educational
and
support services
Pharmaceutics
Industry
Policy Makers
and
Administration institutions
Health Funders
Purchase /reimbursement:
State, insurance companies,...
Traditional Health sector Players
New Entrants
Figure 14. Telemedicine players.
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Master Dissertation
Wright (1997), suggests that the huge costs, and the fact that Telemedicine requires
expertise from several distinct disciplines, acts as an incentive for new alliances or
agreements, justifying special joint ventures, among new and old players.
II.1.1. Health Providers
Health care institutions vary in dimension (number of health professionals, beds...), scope,
geographic cover, public or private ownership and funding, etc.. Because hospitals are the
most representatives of all possible areas of intervention, focus will be made on them to
assess Telemedicine implications on health providers. Furthermore Through this work
hospitals will be commonly referred as standing for all institutional providers
Empirica and WRC (2000), state that standard communication patterns exist among
hospitals and 3rd parts. Namely with:
-
Ambulatory care services, for patient referral and discharge, receiving test requests
and despatching test results.
-
Other hospitals, for patient’s referral/transfer, transferring test results, getting
specialists opinion, receipt education and training.
-
Patients home, for bookings / appointments, provision of home care.
-
Reimburses, for validating reimbursement agreements, claims and payments receive.
-
Educational and information sources, for ongoing education and research support
information.
-
Suppliers, for purchase and stock management.
-
And policy / administration agencies.
All these are areas of telecommunications intensively use. Consequently potential
Telemedicine targets.
Suppliers
Suppliers
Patients
PatientsHome
Home
Outpatient
Department
Dispensary &
Warehouses
Hospital
Research
Teaching
Other
OtherHospitals
Hospitals
CME
CMEand
andInformation
Information
supports
supports
Departments
Policy
Policy/ /Administration
Administration
Accident &
Emergency
Reimbursers
Reimbursers
Ambulatory
AmbulatoryCare
CareServices
Services
rd
Figure 15. Hospital - 3 part connections.
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Master Dissertation
A detailed analysis of hospital communications reveals potentially Telemedicine benefits.
Never the less services enhancement and cost reduction, don’t necessarily match and
can only be measure trough a deep benefits quantification and costs compare.
HEALTH CARE PROVIDERS
BEFORE
PRESENTLY
CORE BUSINESS
- Local Care services
- Local Education
(medical schools)
- Local Care services
- Remote care services
(home, rural…)
- Local Education
(medical schools)
- Remote Education
(multimedia tools)
- Information management
TARGET MARKET
- Local ill population
- In person students
- Local and remote ill populations
- Home chronic patients.
- Wide spread students
-
-
BUSINESS PARTNERS
REVENUE SOURCES
Equipment & medical suppliers
Funders and policy makers
Administrators
Educators & support services
- Pre-defined budget
- Per fee local service
Equipment & medical suppliers
Systems Integrators
Telecoms
Funders and policy makers
Administrators
Educators and support services
- Pre-defined budget
- Per fee local and remote services
- costs cut by system optimisation
(home care, just-in-time care…)
Table 5. Major changes in health Providers business.
II.1.2. Telecom Operators
Telecom operators are the strongest new entrants in the health care business. In a
Telemedicine Today (1996) article, a prevision of US Telecoms revenues for 2001 pointed
to 1% of the total income being originated in Telemedicine business. Although this 1%
might seam short, fact is that it can be measured in billions of dollars. In 1997 the
International Telecommunication Union established as one of its priorities, to promote and
implement Telemedicine solutions, (ITU 1999). This and other similar facts strongly
suggest the recognition of an opportunity and intention among Telecom operators to
explore a new revenue source.
Considering the traditional interoperations between health players (chapter 1), it’s possible
to identify among most of them, telecommunication’s contribution for the process of
improvement:
-
Interaction among services providers. Patient’s clinical information is being
transferred in digital format, using health telecommunications networks.
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Master Dissertation
-
Interaction between services providers and consumers. Consultation and treatment
manage is being done remotely using videoconferencing systems.
-
Interaction between services providers and educational institutions. Ongoing medical
education and training is using self-learning multimedia tools, and remote
videoconferencing coaching.
-
Interaction among consumers. Self-help and discussion groups are increasing fast
with easy access to telecommunication tools like Internet.
Other cases can be referred, reflecting telecommunication importance in the process of
connecting health players. But Telecoms business intentions go beyond the carrier role.
Telemedicine Today (1996) referring a study from Insight Research Corporation, suggest
that Telecoms interest in Telemedicine lead to a vertical (up and down) integration of
activities like:
-
Consulting.
-
Equipment sales. Many Telecomm operators are reselling, (and in some cases are
themselves manufacturing) Telemedicine equipment and providing the technical
support needed to make it operate properly.
-
Systems integration.
-
Network management.
-
ASP. Some companies are developing and providing educational materials and
workshops for erstwhile users. Many of the carriers are positioning themselves as
turn-key Telemedicine solution providers.
Based on Wright (1997) proposed Telemedicine value-chain model, and representing
Telecoms move, becomes clear how they place them selves in a fundamental, “pivot”
position, that “isolates” traditional health players.
Educational
Educational
and
and
support
supportservices
services
Technology developers
Technology developers
Equipment
Equipmentsuppliers
suppliers
Systems
SystemsIntegrators
Integrators
Home Health Care
Home Health Care
Health
HealthInfo.
Info.Networks
Networks
Consumers
Consumers
Providers:
Providers:
Health
HealthInstitutions
Institutions
Health
Healthprofessionals
professionals
General Telemedecine Value-Chain
Telecom
TelecomOperators
Operators
Telecom Operators vertical move
Figure 16. Telecom operators’ migration, along Telemedicine the value chain.
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Master Dissertation
Health Information Networks (HIN) and Home Health Care (HHC) are pointed as being the
two more attractive areas for operators, with many Telecoms developing partnerships with
healthcare systems developers to im plement digital distributed networks, that can support
voice, data, and video. HHC is considered to be in an early stage, and Telecoms are
pointed as having a determinant role in "growing the industry", assuring that the
necessary infrastructure is made available, affordable, and reliable. In HHC, TV cable
operators (a subset of telecom operators) are in a privilege position to take advantage of
their already existent open channel, with large bandwidth, into customers home.
Although no concrete study as been found to support the existence of a direct relation
between Telecom operator type, and type of Telemedicine activities developed,
conducted readings do suggest that local carriers will show biggest interest for home care
solutions
and
equipment
selling
plus
integration.
On
the
other
hand,
long
distance/international carriers will focus on Health Information Networks, consulting
activities, ASP and network management. This can be supported, by local carriers
preferential access to final consumers, by being closer, owning the circuits and being a
known brand. As well as by the need to increase ARPU, in a small market where
penetration rates is usually high, and costs are usually smashing due to competition or
regulation. On the other hand, long distance carriers have better access to decentralised
health providers, namely specialists, institutions, clinics and hospitals. As well as they
have a hugger market, more appropriated for ASP solutions.
PHONE COMPANY
TYPE OF
SERVICE
Regional
Carrier
Long Distance
Carrier
Long Distance
Carrier
International
NAME OF
COMPANY
Bell Atlantic
Sprint
AT&T
Telenor Norway
Nº OF EMPLOYEES
DEVOTED TO TM
100
100
>100
40
TYPE OF TM PRODUCTS
DEVELOPED
Partnership with best-in-class
partners to develop
teleradiology, and total image
management solutions
RESELLE
TM EQUIPMENT?
Yes
OTHER TYPE OF TM
PROD&SERVICES
PROVIDED
--
CURRENT TM
PROJECTS
Sites unspecified: Dept of
Prisons, telepathology,
academic institutions
TYPE OF
WIRELESS OFFER
Working on home health and
emergency digital wireless
connectivity
COMPANY DIFFERENTIATION
AND POSITIONING IN TM OFFER
Comprehensive solutions in
conjunction with best-in-class
alliance partners
An integrated platform that
provides health info.
networks, telemedicine, and
teleradiology apps
Yes
Consulting
- St. Lukes/Shawnee Mission
(Kansas City, MO)
- E. Carolina U. (NC)
- VAMC, Portland, OR
Not Specified
Provides a total solution:
network, hardware,
peripherals, post-sale
support
AT&T GlobalMed
Telediagnosis Station; turnkey
unit for interactive or S&F
tele -consulting
--
Consulting
- A complete Tteleradiology package.
- A multimedia workstation-based
image viewer for live and S&F apps;
- A 3D modelling and visualisation of
CT scans
Yes
-Tromsø University Hospital
--
Not Specified
Most installed sites of any
Telemedecine solution
provider
Satellite-mediated high
bandwidth on demand for
closed-group medical uses
- Close contact with research
institutions and medical
markets
- Highly innovative products
Table 6. Survey of Telecoms positioning in Telemedicine. Source: Telemedicine Today (1996).
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Master Dissertation
The survey “Telecom Company Activities in Telemedicine”, whose major results are
presented in table 10, isn’t enough to extract conclusions like local / long distance carriers,
have a preference for a certain type of Telemedicine applications. Although it seams
enough to demonstrate Telecoms interest in Telemedicine as part of their future business,
and in supplying turnkey solutions.
TELECOMS ACTIVITIES IN THE HEALTH SECTOR
BEFORE
CORE BUSINESS
TARGET MARKET
BUSINESS PARTNERS
REVENUE SOURCES
PRESENTLY
- Bandwidth sell
- Network Management
- Bandwidth sell
- Network Management
- Equipment sell
- Systems Integration
- Consulting
- ASP
- Health Provider (professional
and institutional)
- Consumers (General)
- Health Provider (professional
and institutional)
- Consumers (General)
- Funders
- Administrators
- Educators and support services
- Equipment developers
- Systems Integrators
-
Equipment developers
Systems Integrators
Health Providers
Funders and policy makers
Administrators
Educators and support services
- Traffic
- Sells % (equipment)
-
Traffic
Equipment Sells
Services Sells
Revenue Sharing
Table 7. Major changes in Telecoms health business.
II.2.
Telemedicine Initiatives
Telemedicine products and services can be segmented in three main areas: clinical,
administrative, and educational.
-
Clinical activities focus on remote consulting and diagnoses. It includes home-care,
life signals monitoring, emergency care, extreme environment services (sea, rural…),
remote consulting, etc.
-
Administrative activities presume the development and implementation of health
networks for clinic information and managing tools. It includes patient management
(appointments, exams execution and follow up…), insurance companies relations
(insurance polices validation, authorisations, payments…), patients information
transfer and analysis, etc.
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-
Education includes online teaching and actualisation, professionals’ enhancement
communication, etc.
II.2.1. Life Signs Monitoring
Life Signs Monitoring (LSM) is one of the most widely spread services of the subset of
home health care applications (although it doesn’t confine to home care). It started with
cardiac patients, but rapidly expand to other chronicle diseases like diabetes or asthmatic
patients.
A patient with cardiac problems should maintain a straight surveillance of his health
evolution. Which could include home-health visits, periodic hospital exams, drugs
prescription and ministration, etc. His mobility is deeply restricted to availability of medical
care in emergency situations. With life signs monitoring services he receives continuos
attention, at a fraction of the price of an on-site visit, allowing an increase in patient’s
autonomy, and consequently life quality.
Most, of these solutions require the cognitive and observational skills of a physician, but
not his on-site presence. Typically the patient is given mobile equipment that periodically
measures life signals and executes EKG’s. This information is send to a operational
centre where a specialised assistant has access to patient clinic history, as well as
present data, and recommends an appropriated action. In simple cases the patient can
execute is own treatment, or in serious cases an emergency team can be sent to locally
assist him. In any moment the patient can trigger the process.
Funders
Funders
Convention or
Per service fee
Health surveillance
Chronic
ChronicPatient
Patient
Monthly fee
Health Provider
Acquisition and
maintenance
Per service fee
Monthly or
Per service fee
Health
HealthProfessionals
Professionals
Suppliers
Suppliers
Telecoms
Telecoms
Traffic
Ambulatory
AmbulatoryCare
CareServices
Services
Equipment
EquipmentDevelopers
Developers
System
SystemIntegrators
Integrators
Money flux
Service flux
Figure 17. Chronic patients / LSM – Business model.
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Master Dissertation
II.2.2. Remote Consulting
In remote consulting, Teleradiology is the most widely spread solution. It allows store and
forward of radiographic images, including acquisition, processing, management and
transmission, to be displayed on a remote monitor and interpreted with diagnostic
reliability.
Other
remote
Teleconsulting
specialities
include
Teledermatology,
Telepathology, Telecardiology, Telepsychiatry, Teledenstitry, and Surgical Telementoring.
Some of these are new business opportunities, positioning them selves as first line
despite centres or second opinion diagnoses. But others like Telepsychiatry overlap with
traditional models. Telepsychiatry is a speciality where new technological options feet like
a glove. Not only offers all the needed means for adequate communication between
patient and doctor, but also provides other added values like, decentralisation (doesn’t
matter where any of the players is), and anonymous (customers can be consulted and pay
in a totally unknown base).
II.2.3. Electronic Medical Records
On the administrative area, exchange of patient information is a highly explored field.
Patient records are often sent between various hospital departments and institutions as
patients move around, forcing health care institutions to confront with information security
and confidentiality problems. Many institutions now have computer-based electronic
medical record (EMR) systems, who easily and rapidly exchange encrypted information.
All these are areas of intensive use of technology, particularly telecommunications, and
represent a parallel evolution outside Internet, but using in many cases similar technologic
architectures, products and know-how.
II.3.
Costs and Benefits
Some Telemedicine products and services have been introduced gradually, very
smoothly, with few or none impact in market relations. Others instead (e.g. LSM) were
radical innovations, with waves of repercussions on patient health quality and health
players relations.
While there are significant potential advantages and benefits from Telemedicine, the
evidence of its cost-effectiveness and sustainability is short. Wright (1997), suggests that
the main reason for this, is related with the fact that much of the Telemedicine activity has
been developed in the form of pilot projects or demonstrations in universities and hospitals
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Master Dissertation
with subsidised funding from government or other sources. The number of self-sustaining,
commercial applications of Telemedicine is growing but still small.
COMPETITIVE HEALT CARE MARKETPLACE
TECHNOLOGICAL POTENTIAL
COST SAVINGS
WHY
TELEMEDECINE?
ACCESS TO CARE
JUST A
MIRAGE?
SHORT TIME TO TREATMENT
ENHANCE PROFESSIONAL COMUNICATION
Figure 18. Telemedicine expectations.
Wright (1997) suggests that Telemedicine yields cost savings in certain circumstances,
but often the savings and benefits accrue to those who do not have to pay for the service.
Thus, few service providers have found a way to recover their costs (and make a profit)
from those to whom they provided their service. Nevertheless, with the rapidly declining
cost in hardware and telecommunications, the level of interest and the corresponding
activity in Telemedicine is growing fast.
II.3.1. Patients Satisfaction
The physicians, technical staff and patients are key components in a Telemedicine
project. Their level of comfort with a particular system, determines is success. Surprisingly
patients are many times the least resistant. Fisk (1997), states that self-consciousness of
being on camera or video, concerns some health professionals. Never the less, and
system independent, both usually recognise Telemedicine benefits.
Wright (1997), proposes that Telemedicine benefits can be classified and grouped in three
sets:
Tangible direct benefits. Whose monetary value can be quantified, for example:
-
Savings from reduced travel costs of specialists engaged in consultation or teaching
sessions;
-
Savings from reduced travel costs of patients;
-
Savings on hospital accommodation of patients that can be treated remotely;
-
Savings on hospital processing costs of patients that can be treated remotely;
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Master Dissertation
-
Savings due to provision of health care in remote clinics or mobile health units versus
expansion of urban or regional hospitals (i.e. the difference in the construction and
running costs of facilities).
Intangible direct benefits. Those that have a qualitative but the quantitative value is more
difficult to determine:
-
Better access to consultations and second opinions, resulting in avoidance of delays
or costly mistakes;
-
Reduced waiting time and transfer delays which can in some cases prevent serious
complications or death;
-
Reduced expenses for family members who might otherwise accompany the patient
-
Improved effectiveness of specialists. With more patients being seen due to reduced
travel;
-
Improved teaching and learning possibilities and reduced cost of training of local
medical specialists;
Indirect benefits. Those accruing to various parties involved in the provision of
Telemedicine, such as:
-
Increased revenues to equipment providers, hospitals, and telecommunication
services providers;
-
Enabling specialist and technical personnel to increase their knowledge and
qualifications;
-
Easing decentralisation of care and distribution of competence;
-
Promoting maximisation of scarce central resources (both technical and human)
Other authors suggest different classifications and grouping procedures, like according to
the target group (patients, providers, operators…), but variables remain the same. Over
stepping these common accepted benefits, Kienzle (2000) suggests that the level of
patients and providers satisfaction is directly related to their comfort with:
-
Technology
-
The process requirements
-
Communication quality.
-
And consulting provider interaction.
In many cases, although technologically efficient, solutions can be highly expertises
demanding, with unfriendly user interfaces, and consequently limiting the scope of its
appliance.
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Master Dissertation
In the patient perspective, easy access to care (both in time, travel and expenses) is
expected. A continuos and closer communication with physicians or other health
professionals, and added attention are determinant to enhance confidence. As for
practitioners, patient satisfaction must be evaluated in what concerns technology, process
and interaction comfort levels (Kienzle 2000).
Fisk (1997), states that if Telemedicine is developed into user friendly systems for
practitioners and patients and provides quality health care at an economical rate
Telemedicine will become common place in U.S. and many other countries around the
world in less than 10 years. Never the less, although expectations are high, they don’t
exist without risk:
-
“In-person” contact is highly reduced and there is the risk of dispirits the relationship
between the patient and the physician, which can reduce loyalty to consultant (EU
1997). This can be particularly worrying to market structures where patients have
freedom of choice (e.g. France and US).
-
The high tech associated to services might increase patients’ expectation, which can
conduct to a higher level of anxiety and un-satisfaction as well as health expenditure.
Kienzle (2000), enhanced the need to build a patient relationship by:
-
Making the interaction personal.
-
Taking the time to introduce, exchange, verbalise, examine and communicate.
-
Defining the role and the scope of care to be expected by patient.
-
Explain the potential risks and benefits and never guarantee an outcome.
II.3.2. Profitability
Telemedicine has the potential for offering both qualitative and quantitative improvements,
in health care services. This results from:
-
Its ability to decentralising health care, improving and stimulating access to resources
not routinely available to the medically under-served populations.
-
Opening up new methods for education and training of remote areas health-care staff,
which can have regular access to lessons given by specialists in central hospitals
(e.g. on the management of special diseases).
-
Increasing effectiveness and efficiency, for example in reducing waiting times for
consultations, and in introducing medical information systems.
These characteristics do suggest that Telemedicine could reduce health costs in various
ways, while improving the quality of service. Using a patient / provider approach, Wright
(1997), points two sets of potential cost savings:
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Master Dissertation
-
For the patient it cuts down travelling costs, to access major health centres and
specialists. Plus it reduces the length of hospitalisation, by moving to home as the site
of care.
-
For the providers, trough a resources centralisation (both technical and human) and a
services de-centralisation, operational costs can be reduced. Specialists time and
travelling expenses can also be minimised, and a reduction on health professionals
training and updating costs, is achievable, through the introduction of distance
learning mechanisms.
Never the less, funders and policy makers, are deeply concern in evaluating Telemedicine
economic viability. Allen and Stein (2000), point three major concerns:
-
Cost-saving. Does it reduces costs, or simply shifts them3? If so, to who does it
reduces it and where are the savings and the new cost sources?
-
Cost-effective. Does it improve efficiency enough to justify its cost?
-
Cost-equivalent. Is it the preferable solution in long run?
These concerns lead to a deeper question of what is the right goal for Telemedicine,
reduce costs or enhance health services equity and efficiency? This “right goal” changes
with players’ perspective from case to case. Assessing costs vs. clinical outcome, (such
as diagnose speed, or quality and years of life gained), is deeply procedure dependent,
and human variables are hardly estimated. But when evaluating costs savings and shifts
there are specific categories that should be considered, (e.g. ROI, alternative uses, cost of
doing business), that under a limit scope can be measured. Under this categories, Allen
and Stein (2000), propose that a straight cost analyse, should focus on:
-
Fixed
costs.
Covering
personnel,
equipment
(local
and
remote)
fixed
telecommunications costs, preliminary studies, space rental, maintenance, insurance,
cost of capital (amortisation of equipment, interests...).
-
Direct variable costs. Including procedure costs such as specialist and non specialist
fees, film, supplies, billing/collection, transcription and reporting fees, hourly
telecommunications costs, travel and missed appointments.
-
Indirect variable costs. Including licenses, insurance, marketing, film courier services,
voice telephony service. Patient travel, child care, lost work time...
Based on this cost segmentation, when comparing traditional and Telemedicine cost
structures there are cases of entering and living costs sources, as well as changing
importance among some others. In the fix costs, courier services are replaced by
3
“Cost Shift” is considered in the context of new players entering the Telemedicine value chain, and not in a
difference in price practice among players (Buresh 99).
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Master Dissertation
telecommunications monthly fee. Equipment investment both in central and remote sites,
grows pulling maintenance cost and cost of capital. Simultaneously, assuming a
IMPORTANCE
VARIATION
TRADITIONAL
PROCES
HEALTH PERSONAL
Less dependence of
on-staff experts
Local and remote equipment
3rd Part Integrators
EQUIPMENT
SPACE RENTAL
Moving to home as
the site of care
TELEMEDICINE
HEALTH PERSONAL
EQUIPMENT
SPACE RENTAL
MANTEINANCE
Local and remote equipment
MANTEINANCE
INVESTED CAPITAL
Local and remote equipment
INVESTED CAPITAL
COURIER SERVICES
TELECOM. FIX COSTS
TRAVELING COSTS
TELECOM. HOUR COSTS
PROCEDURE
SPECIFIC PRODUCTS
As we move from embodied (ex:
films) to disembodied (ex: data)
PROCEDURE
SPECIFIC PRODUCTS
LOCAL NON SPECIALIST
HOUR FEE
FORMATION
AND CME
As access to information and
self-learning tools became available
FORMATION
AND CME
LICENSIES
TELEMEDICINE
INSURENCE
MARKETING
Figure 19. Costs variation.
small variation in demand, the need for on-staff personal is reduced, both by using remote
experts as well as by efficiency growth. And as we move to patients home as the place of
care, space needs are also reduced.
On the direct variable costs, patient and health professional travelling costs are replaced
by telecommunications hour cost or “air time”, while specific procedures requests (e.g.
radiographic films and stocking space) are replaced by less expensive procedures (e.g.
like digital data stoking).
In indirect variable costs, an additional licence (traditional medicine plus Telemedicine)
acquisition and maintenance must be considered as well as insurance and new efforts for
patient captation. The health professional formation investment (continuos medical
education - CME) as a reduction, due to new formation models, like on job learning by
access to remote specialists diagnoses methodologies and techniques, as well as by new
multimedia remote formation courses.
Most existing cost studies have been done in the health institutions an funders
perspective, since these are the entities that are most likely to be involved in decisions
about buying and deploying Telemedicine services. Focus is concentrated in applications
that are considered “mature”, like remote consulting and particularly Teleradiology,
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Master Dissertation
Telepsychiatry, home care, and prison care. Independently of studies results, these are
areas of Telemedicine, with success cases confirmed by real evidences like the number of
projects and age, as well as geographic dissemination. Where these studies also
converge is that Telemedicine solutions are highly scale dependent. Equipment
investment is still high for short period and low patients number, payback.
Fisk (1997), presents three cost-benefit case studies, with positive results, although no
straight cost analysis, with breakeven projections was conducted:
-
The University of Texas Family Medicine Department established a teleconference
and Telemedicine system and after a 12 month study found interactive video
Telemedicine to have saved $102 per hour in physician time or $74,511 in 12 months.
-
The University of Maryland installed in 1991 a PACS for their radiology centre, which
had cost $7.8 million. Their volume in number of tests/studies increased 60% and
they have added very little staff. They had a 40% decrease in the technician's time, a
15% decrease in the radiologist's time, and decreased the lost examination rate (the
number of films not reviewed and interpreted) from 8% to .5%.
-
Walter Reed Army Medical Center, the U.S. Armed Forces flagship hospital in
Washington, D.C. conducted a study for three months of teledermatology
consultations and found that the average wait for a dermatology consultation was
reduced to two days from 48 days. The conventional dermatology consultation took
20 minutes. The teledermatology consultation took 9.6 minutes. Patient confidence
was high with teledermatology because there was decreased anxiety with the shorter
wait periods, and the GPs gained dermatology knowledge by being an active
participate in the teledermatology consultation. In 1996 Walter Reed estimated they
could save $298,907 by utilising teledermatology in all their dermatology consult
cases.
Another solution, being tested by researchers from the University of Maryland, Ohio, is a
system that transmits diagnostic patient information (video and audio) from inbound
ambulances to waiting emergency room providers. The transmitted information allows the
emergency room personnel to develop a preliminary diagnosis, so that they can take the
steps necessary to provide immediate care once the patient arrives, saving time and
resources. On these cases, gain factor can be summarised and grouped in:
-
Health professional time. It’s usually reduced due to better-organised and more
oriented approaches.
-
Increase in processing capacity and accuracy, due to the use of more systematic and
routine programmable mechanisms.
-
Reduce of waiting lists and waiting time. Both throw a grow in processing capacity as
well as by having easy access to non-resident experts.
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-
Increased patient satisfaction, due to reduce of waiting times and consequent anxiety.
But still, even excluding eventual failed projects, these gains aren’t enough to ensure
projects cost efficiency and consequent sustainability, as they are measured and
observed in the single perspective of service improvement.
-
In the University of Texas project, who pay communication time? Is this cost cover by
the physician timesaving?
-
In the University of Maryland project, what type of repercussions occurred, in
complementary areas like number hospitalisation (and consequent per-day cost
increase), or growth of conducted testes?
-
In the Walter Reed Army Medical Centre project, did easy access increased reincidence or “second consultation” number?
Similar questions can be raised in the other examples. Although they might sound unhuman, they are quite real when dealing with a limited budget that as to measure the
human lives revenues from different health solutions (Béresniak and Duru, 1999).
Wright (1997), states that a framework for cost-benefits analyses, beside enable a good
understanding of all cost and benefit elements, should provide an evaluation of their
evolution in time, and reflect key issues like:
-
The project overall feasibility in a country or regional setting;
-
The annual schedule of savings resulting from the project;
-
And the annual operating costs for the health centre responsible for running the
project.
It is important that the apparently large set-up cost of a Telemedicine programme is
contrasted with all categories of benefits over a suitable period of time, based on a net
value analysis, able to reflect the value of a project to the all community.
In accessing a Telemedicine project he defines three main criteria’s, that focus on the
adequacy of scale and scope:
-
An health-care criteria, reflecting the types of patients and symptoms to be
addressed, the skills needed for the health professionals, the work flow to be
established or modified and the evaluating methods;
-
Management criteria, considering the operational support needed, administrative
skills required, technical requirements and skills, and training needs;
-
Technology
criteria.
Considering
technical
feasibility,
equipment
required,
telecommunications reliably, image quality, diagnostic accuracy, etc.
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II.4.
Market Trends
Although technology speed and possibilities pushed Telemedicine, among health care
players, and particular providers, huge doubts and concern exist, in relation to issues, like
liability, reimbursement or malpractice. Overall, competition is increasing fast with
telecommunication operators, equipment manufacturers and specialised service providers
competing for local and National Telemedicine markets. The huge costs and high levels of
expertise required from distinct disciplines, is contributing to the development of special
agreements and joint ventures, among new and old players. And competition doesn’t
restrict to country’s markets. As capacity to offer services over borders increase and, for
some markets, few regulating exists, international competition among providers occurs,
including not only Telecom companies or particular providers but even countries. Wright
(1997) refers the case of Australia and Singapore, who seam to be competing to become
regional hubs for Telemedicine services.
In this context telecommunications policy and services regulation will greatly effects
Telemedicine sustainable development. Special institutional incentives are being created
both in EU and US, to promote Telemedicine projects. Frequently, studies and reports
mentioned the US Federal Communications Bill of 1996, who allows for long-distance
telephone companies, cable companies and others to compete with local telephone
companies for providing communication service to be used in Telemedicine projects. This
was expected to help decreasing prices in the rural and previously isolated areas, and so
working as a facilitator for Telemedicine projects.
II.4.1. Market Development Stage
Most of the Telemedicine experience to date has been in the developed countries. Wright
(1997), suggests that developing countries priorities, in most case unable the financing of
Telemedicine activities, although given it’s potential it could facilitate the provision of
medical information and health care, and reduce health expenditure. Also, considering
fundamental the telecommunication operator’s role, this sector local development might
be determinant to projects success. These constrains have kept developing countries in a
more observatory and information gathering position.
There are many Telemedicine applications, some relying on sophisticated and expensive
technologies, out of the reach of developing countries, others quit simple and efficient like
medical call centres. Countries like US, some EU members, Japan and Australia have
considerable experience in Telemedicine. The EU commission supported a large number
of Telemedicine projects, about 45 in the Third Framework Programme and about twice in
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the Fourth Framework Programme. The costs amount to more than 305 million US$ over
an eight-year period (Wright 1997).
US – Telemedicine projects:
In US Telemedicine started early in the 60’s with a number of pilot projects in both rural
and urban areas that linked rural clinics, nursing homes, prisons and Indian reservations
to distant health-care centres.
Applications currently operational in the United States include: primary care, preventive
medicine, public health, consumer health information systems, continuing medical
education, consultative services, and systems to improve financial and administrative
transactions, and facilitate research. In addition to industry-led projects, there are a
number of federal and state programmes that allocate funds to support Telemedicine
development.
-
More than 35 states have current Telemedicine projects and many of those states are
developing state-wide telecommunications networks to link hospitals with rural areas
in order to reduce costs and improve the overall state health-care system. Some US
hospitals even provide services to patients in other countries, in the form of second
opinions by teleconsulting.
-
Another large Telemedicine project in the US uses videoconferencing equipment in
prisons. Approximately 2500 prisoners from Texas prisons were treated via
Telemedicine in 1995, and the number as been continuously growing.
-
A Minnesota clinic, called Mayo Clinic, uses satellite technology to provide two-way,
real-time exchange between health-care professionals and their patients, having
services with several US sites offering surgical and diagnostic consultations in
addition to transmitting medical images and information around the world.
Many other examples of Telemedicine projects in US can be quoted, with private and
state intervention, and with military Telemedicine having an important role (Wright 1997).
UK – Telemedicine projects:
The UK NHS is developing a network for health purposes, which eventually will connect
from large teaching hospitals to local GPS, dentists and pharmacists. The UK Department
of Health, co-ordinates the project which is being developed by British Telecom and Cable
and Wireless Communications. The NHS will buy capacity on an ad-hoc base, avoiding
the costs of setting up and managing is own infrastructure. A number of services will be
available including Internet access and a set of Telemedicine services like remote
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consultations, access to medical databases, distance learning, email for administrative
purposes, bulletin boards for the exchange of information between clinicians, and the
transmission of patient records, referral letters and test results between GPs and
hospitals, etc.
Other on going projects include:
-
A Teleconsulting project, was implemented between the Peterhead Community
Hospital and Aberdeen Royal Infirmary, for teleradiology and second opinion on
patient management
-
An Automatic electrodiagnostic system for electro-oculography.
-
A remote training in minimally invasive surgery, developed by University of Dundee
and Ninewells Department of Surgery
-
A Multimedia project for education in diabetes. Target to patients, carers and
clinicians, it will evolve to include asthma and cardiovascular conditions.
-
A Remote advice project between Wembley Hospital and the main Accident &
Emergency Unit at the Central Middlesex Hospital 5 km away
And many others smaller projects, mainly in the public sector and state subsidised.
The following chart reflects briefly Telemedicine development stage among some of the
most important countries in this field.
Country
Existence
of Country
telemed
experience
Type of
usage:
Belgium
Yes
4
Canada
Yes
1, 2, 3, 4, TO, univ hosp Commercial,
5
experimental
Grants, users, Yes
univ, hosp
Yes
Denmark
Yes
4
Public service
Govt subsidy, No
hosp, councils
Yes
Finland
Yes
1, 2, 3, 4, TO, MoH,
hosp, univ
Experimental,
commercial
TO
No
Not yet
France
Yes
1, 2, 3, 4
TO, univ
hosp, SPs
Experimental
public service
Govt, univ
hosp, TO, SP
Yes
Yes
Germany
Yes
2, 4
All
Govt subsidy, Starting
TO, insurance
Yes
Greece
Yes
2, 4
TO, hosp,
univ, private
SPs
MoH, hosp,
univ
Public service
Govt subsidy, No
univ, hosp
No
Italy
Yes
3, 4
TO, MoH,
hosp, univ
All
Yes
Netherlan Yes
ds
Norway
Yes
1, 4
Hosp, SP,
insurance co.
TO, MoH
hosp, univ
Experimental
Govt subsidy, No
user, hosp,
TO
SP, insurance
company
Govt, univ,
Yes
TO, hosp
1, 2, 3, 4
Type of
providers
Hosp, univ,
private SPs
MoH, hosp,
univ, councils
Commercial /
Public service
/ experimental
Commercial
Experimental,
commercial
How is
telemed
funded?
Govt subsidy
Offer to Existence of
other
policies or
countries regulations
?
affecting
telemed?
No
Yes
No
Yes
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Portugal
Yes
1, 2, 3, 4
TO, MoH,
hosp, univ
Experimental,
public service
Govt subsidy, Yes
No
univ, hosp,
TO
Russia
Yes
3, 4
Hosp
Experimental
International No
No
organizations,
NGOs
Spain
Yes
1, 2, 4
Hosp, univ,
Experimental
Govt subsidy, Yes
No
SPs, MoH, TO
hosp, EU
Sweden
Yes
1, 2, 3, 4, TO, hosp,
Public service,
Govt subsidy, Yes
No
5
institute
experimental
hosp, TO,
univ
US
Yes
1, 2, 3, 4, Hosp, univ
Commercial,
Govt subsidy, Yes
Yes
5
experimental
univ, hosp,
TO, users
TO=Telecom operator; MoH=Ministry of Health; MoC=Ministry of Communications; hosp=hospital or clinic;
univ=university; SP=service provider or equipment supplier;
Type of usage: 1. Extend healthcare; 2. Educate, train; 3. Emergency use; 4. Consultation; 5. Research;
Table 8. Country’s Telemedicine development stage. Source: Wright (1997).
II.4.2. Driving Forces
The high health sector dynamic, and particularly Telemedicine is being drive by many and
different factors, like:
-
Patients growing expectation, with technology fast development and wide spread
benefits among many sectors, including the health sector.
-
High values of health expenditure and governments need for alternative, less
expensive practices. That ideally would move detection and treatment from a later,
more expensive stage, to an early stage.
-
The assumption of health as a natural right and the need to reach remote underserved, populations.
-
Telecoms high competition and the need to develop other revenues sources. In
markets where penetration level is high, solutions to increase ARPU are the only way
to maintain growing rate.
II.4.3. Barriers to Change
“If you use a laptop to consult over the web, where does the Telemedicine consult take
place? If you are mentoring a Teleendoscopy procedure who is liable if the connection is
lost and the bowel perforates?”
M. Kienzle 2000
Assessing Telemedicine, Kienzle (2000), points a large number of aspects that are
presently responsible for a certain insecurity and indecision among health players. These
can easily be grouped in two major groups:
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-
Technological concerns.
-
And Legal/regulation concerns.
Technology
Technology’s high growing rate, particular in telecommunications and computer science,
it’s commonly recognised. These fields fast development created expectation among
many sectors, particularly in the health sector.
Telemedicine is not a specific technology but a mean for providing health services at a
distance using telecommunications and medical computer science. Nevertheless it is
highly equipment dependent as traditional “hands-on” physical care is replaced by
technological expertise, visual contact and data evaluation. Consequently relationships
became highly depends on quality and reliability of equipment. Common concerns are
focus on quality aspects like:
-
Sound fidelity.
-
Image resolution.
-
Range of motion depicted.
-
Transmission speed.
-
Information security.
Bandwidth is a horizontal concern. The greater bandwidth produces higher costs but
provides greater capacity for real-time images, video, and higher quality resolution. Colour
quality and time frames speed are determinant to identify and evaluate movements and
reactions.
The type of Technology used and consequent concerns depends on the type of
applications a particular Telemedicine service intends to provide. Applications like store &
forward only need a standard telephone line to be considered a “robust” network; while
teleradiology applications require high bandwidth networks. Different from what happens
with Internet, Telemedicine technologies are still far from being a commodity. Although
most are commonly used and accepted, they have a very limited application scope,
related with medical specialisation areas.
Regulation
Traditional medicine practice required physical presence. Telemedicine has the power to
cross countries and reach over borders, raising sovereignty and legislative questions has
existing regulations for licensure, malpractice, litigation and legal liability, becomes
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obsolete, and no common standards or guidelines currently exist for the practice of local
and international Telemedicine.
The US seams to have adopted a reactive position in legislation efforts. As in the Internet,
government approach goes for defining none limited legislative environment, and let
litigation to define the specificity of Telemedicine practice. Some defend that Telemedicine
falls under the commerce clause of the constitution, which prohibits states from erecting
barriers against interstate trade. Fact is that currently a national licensure seems unlikely
(Gobis 1998).
Licensure and Jurisdiction
In US the laws for license to practice medicine are different for each state. Some states
have addressed Telemedicine issues that relate to licensing in ways that are well defined
and provide for a positive environment for Telemedicine, but others have poor definitions
or have not addressed the issue. Licensure for practising medicine falls into three basic
categories: individual state, interstate or multistate, and national licensure. Gobis (1998),
points that states have the power to adopt laws to protect and regulate health activities,
and they want to protect their health care providers, so a growing number adopted rules
that restrict Telemedicine activities and requires local licensure. Fisk (1997) and Gobis
(1998), suggests that the possibility of a national legislation governing Telemedicine
although proposed doesn’t seam presently viable.
In April 1996, the US Federation of State Medical Boards developed a Model Act to
regulate the practice of medicine across state lines. This act would require professionals
to obtain a special license issued by each state where they which to practice on a regular
or routine basis (“routine basis” concept changes among states). The license would not
allow the health professional to physically practice medicine in the other state unless a full
and unrestricted license were obtained. Also the professional would be subject to the
Medical Practice Act of the issuing state and to the regulatory authority of that state's
medical board. No state seams to have adopted the Model Act. Most delegate authority
for enforcing licensure laws to the state Boards of Medical Examiners.
Although changing from state to sate, regulations usually cover similar issues like:
-
Definitions of the practice of medicine and Telemedicine.
-
Licensure requirements if services are provided on "a regular, routine and nonepisodic basis", with exception for providing emergency medical services.
-
Jurisdictional matters. Out-of-state physicians are usually subjected to the jurisdiction
of state boards and commissions, with disciplinary actions or malpractice claims be
brought in state of patient location.
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-
Information. Telemedicine info must be documented and that becomes part of the
medical record, subject to existing rules of confidentiality, access, disclosure, and
maintenance
Related legislation might regulate technology (e.g. electronic images quality, and level of
service) or insurance companies activity. Some sates prohibit insurance companies from
requiring face-to-face contact.
Under this scenario, a health professional that physically practices in his home state and
provides Telemedicine services to patients in five other states, if licensure were required
in all jurisdictions, would have to complete one in state and five out-of-state applications
for licensure, and pay six registration fees. Also a large number of states require a
physical appearance before the local licensing board. Thus, obtaining and maintaining
multiple licenses can be extremely burdensome. Gobis (1998) suggests that alternative
solutions can pass by:
-
Mutual recognition of consultants by states. Licensing entities agree to legally
recognise the licensure policies and processes of a licensee’s home state and,
therefore, a separate license is not required.
-
Limited licensure (scope, e.g. no licensure need for image and data transfer).
-
Consulting without an implied contract. Which can be difficult as in some states, a
telephone conversation may be equivalent to establishing a “contract” with the patient.
Malpractice Liability
In the US, malpractice, like licensure, is governed by each state's laws and the accepted
standard of care practised in each local. According to Fisk (1997) there are few law suitts
in Telemedicine issues, so it is still unknown how the courts and juries will view
Telemedicine parties' responsibilities. Allen and Stein (2000), rise general concerns
related with the role of involved parts:
-
To providers, whose services must obey to state or country licence laws for health
care services, where does the consultation takes place (specially if more than one
practitioner is involved), and which site determines standards of care and technology
requirements?
-
Telecom operator, that have to ensure infrastructure operability, in a technology failure
case with patient consequences, who is liable? The equipment manufacturer, seller,
operator, maintenance provider, Telecommunications company, healthcare institution
at either/both ends, health professional (for inadequate training, misinterpretation...?
-
Insurance companies. Does insurance’s cover Telemedicine practice?
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Shared liability will likely become a reality, and insurance’s will have to deeply review their
covering policies. All this open questions point to a non-existent Telemedicine practice
guidelines.
Under this scenario Wright (1997), questions if physicians will be willing to make
judgements on the basis of information transmitted rather than seeing the patient face to
face.
Reimbursement
Normally insurance’s companies request face to face interaction, to co-finance a health
care service. In US, Medicare, Medicaid and other insurers have reimbursed
Teleradiology. This is because face-to-face encounter is not required for the interpretation
of radiography as is required in other patient care consultations. Some funders are
beginning to pay for consultations by interactive video and some store-and-forward
telepsychiatry, tele-home health, telepathology and teledermatology. But few funders have
global policies governing Telemedicine. Fisk (1997) states that Medicare is years away
from establishing a Telemedicine reimbursement policy.
II.4.4. Political implications
Although technology is not yet a commodity, the major obstacles facing the use and
deployment of Telemedicine today are in existing laws, regulations, and concerns of the
healthcare professionals and involving network, namely funders, that need to be resolved
for Telemedicine to expand to its potential. Governments’ intervention should be focus on
promoting Telemedicine, developing a scientific critic mass among medical institutions
and health-care professionals, as well as in telecommunications and technology experts.
Data collection and studies dissemination should be reinforced to facilitate supported
decision making. International political alignment and experiences sharing, concerning
Telemedicine laws and collaboration models should be establish and improved. And a
closer articulation among public and private sectors should be promoted, recognising the
huge investments that are normally associated to a solution and the need for scale to
achieve pay back.
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CHALLENGES FACING TELEMEDECINE
LEGISLATION
Licence laws
Malpractice laws
Reimbursement
Funding/Sustainability
Evaluation data and studies
TECHNOLOGY
FINANTIAL FACTORS
Bandwidth
Information confidentiality and security
Interoperability
Initial investment
Time to breakeven
HUMAN FACTORS
Cultural barriers
Resist to change/acceptance
Figure 20. Challenges facing Telemedicine.
The US WGAT (1996) – Action Report, establish as priority working areas:
-
Licensing. Currently, health-care professionals must satisfy numerous requirements to
obtain a local license to practice, with huge costs and administrative burdens.
-
Malpractice liability. There is great uncertainty about whether malpractice insurance
covers Telemedicine services, particularly when those services cross state lines.
-
Reimbursement for Telemedicine services. Few funders have clear policies and are
reluctant to set reimbursement policy at a lower level until more viable applications for
Telemedicine are developed. Many insurance’s companies request face to face
interaction, as so to co-finance any service.
-
Infrastructure planning and development. Health care projects and services must be
considered in planning and developing new telecommunications and information
infrastructures. Policy makers at the state and national level must consider needs and
solutions, both for cost sharing and avoiding redundancies.
-
Telecommunications regulation. Telecomunicatios costs, network cover, and quality of
service for health car purposes must be re-evaluated and regulated.
Similar positions and concerns were expressed by EU (1997), Wright (1997), and Kienzle
(2000). Other focus areas include:
-
Decision supporting information. There’s a huge need for developing gathering and
evaluation mechanisms to support government decisions. Harris (1998), suggests that
Japan is perhaps second only to the United States in overall Telemedicine activity, but
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the lack of reimbursement under the national health insurance scheme has dampened
enthusiasm and little Telemedicine service was developed between 96 and 98.
Referring the Japanese director of the Me dical Technology at the Ministry of Health
and Welfare, he states that available cost-efficiency data are insufficient to justify
reimbursement.
-
Cultural Barriers. It is essential that policy makers, funders and health-care
professionals take the time to learn about the possible applications of these
technologies and their usefulness. Analysing the Japanese health sector case, Harris
(1998), suggests the existence of a generation gap as well as a cultural (language)
barrier.
-
Information security. All patient information formats images, text, video, etc have to be
protected by confidentiality laws and technological solutions. This implies updating
laws and institution's policies to incorporate Telemedicine situations.
-
Standardisation and technology diffusion. One of the technical barriers in connecting
different Telemedicine centres is the difficulty of exchanging and processing medical
data from one site to another, due to incompatibilities in data formats and equipment
interfaces. Although telecommunication standards are well established and some
Telemedicine standards do exist (e.g. DICOM), the software in the medical equipment
from different companies is in most cases proprietary. This hampers the use of
Telemedicine and delays the development of organisational and health-care structural
adaptations.
Wright (1997), also suggests, that due to the usually high cost of Telemedicine projects,
funding mechanism are necessary and could use some state intervention. His proposals
include a percentage of health-care budgets, the development of preferential
telecommunication tariffs, innovating financing mechanisms, and joint ventures, among
others.
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III.
CHAPTER III – INTERNET IN THE HEALTH SECTOR
In the previous chapters was discussed Telemedicine role in pushing the health sector in
the direction of a more decentralised and patient oriented services. Providers gained
access to a much larger market, patients can now obtain local treatment, advice or other
form of care, without expensive and time demanding trips to specialised centres, and so
on. This chapter aims to identify the repercussions of Internet introduction in the health
sector.
The wide spread access to Internet, and the utilisation experience gathered from other
sectors, prospects the fast development of new health practices, and might even work as
a push tool to older Telemedicine services. It challenges the balance of power among
sector players, particularly in the patient/doctor relation where it contributes to consumers’
empowerment, while driving medicine practice into a information supported, patientcentred and tailored offer of care services.
Industrial Age medicine
Hospital
medicine
Disease
Management
Ambulatory
medicine
Assisted
Care
Disease/Prevention
Information Age Health Care
Telemedicine
Self Care
E- health
Prevention +
Self Help
Consumer Empowerment
Figure 21. Health sector evolution. Source: Lere 2000.
Nevertheless, the use of the Internet for medicine purposes, raises a set of medico-legal
concerns. The Internet, by its nature, is not under the control of any identifiable
organisation. Information accuracy is questionable. Older Telemedicine problems like
reimbursement or malpractice and insurance, are now reshaped and eventually
increased. And not less important, by spreading and simplifying access, there is the risk of
stimulate demand with consequent influences in health expenditure.
Through this work the expression “e-health” is used in a broad sense to refer to Internet
activities in the health care sector.
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III.1.
Changes in the Market Structure
Telemedicine introduced new players in the health sector and changed the activity habits
of the existing ones. This process was technologically supported by the introduction of
new products and services, whose level of integration in each player activity is not yet
(usually) fully completed. At this stage Internet is following the same trend, not only
introducing new players, but also requiring a readjustment among each one’s activity. For
those who previously engaged in Telemedicine revolution this represents new source of
costs, but in most cases they benefit from a natural evolution, as well as developed
experience and know-how. For those who didn’t, this seams an opportunity to enter a new
era of care services, overstepping Telemedicine initial barriers and benefiting from others
experience.
Nevertheless, the adoption of online services represents new expense sources: hardware
and software investment, learning time, liability risks, etc, with unclear returns or
advantages. Lerer (2000) suggests that Internet based relationships will be less
hierarchical, more direct and personal. Information availability (almost a commodity) will
affect the value of specialised professional knowledge. Collaborative networks will bring
closer all parts in the e-health environment. Kienzle (2000) states that players will
embrace the Internet whenever it improves their ability to do their work, to improve their
productivity, to gain better treatment. But, commonly with most emerging technologies,
scale and time aren’t there to offer references and support decisions.
HEALTH
PROVIDERS
PATIENTS &
FAMILIES
On-line consultation & diagnose
Health information - Virtual libraries
On-line patient health
records
On-line CME
& Training
Instant messaging &
medication managing
e-Health
Support groups
Home as the
site of care
Collaborative
Networks
Administrative & financial EDI
DTC drugs advertising, prescription & purchase
Electronic claims submission
Technology convergence &
always-on health system
POLICY MAKERS, FUNDERS,
PHARMACEUTICS & TECHNOLOGY INTEGRATORS
Figure 22. How health players use Internet.
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III.1.1. E-health Consumers
Expectations of Internet consumers are high and growing. They are booking airline
reservations, hotels and cruises over the Internet. They are shopping and banking online.
In almost every sector their traditional beaver patterns have changed, and they are
bringing the lessons they have learned and the skills they have developed through the
interactions with other industries, to their health care expectations.
The emergent e-health consumer knows more, expects more and demands more. They
are researching their symptoms in online libraries, health magazines, web sites and chat
rooms, arriving at the physicians’ office armed with web-based information. Similar to
most authors Lerer (2000), suggests that the e-health consumer is being “empowered”
due to an increased ability to obtain health information and to seek health related offerings
via Internet. He isn’t solely concerned with illness but, as his knowledge continues to
develop, so do his expectations on high level of services and life quality. Confirming this
position, Stuart (2001) mentions a survey conducted in Canada, which states that the
Internet is rapidly becoming an important alternative source to practitioners information,
with one-in-four Canadians using it to obtain health information, threatening patient/doctor
power balance. Most patients go online to get information about specific illnesses, but
they are also using it to:
-
Diagnose themselves
-
Confirm or dispute a physician's diagnosis
-
Check the results of medical studies
-
Identify clinical trials for breakthrough new treatments.
-
Find out more about specific prescription drugs
-
Chat with others with similar health conditions.
He justifies this change in consumer behaviour with Internet accessibility, easy of use and
24 hours day availability, inclusively from consumers’ home and on the move.
A Deloitte (2000) study suggests the e-health consumer is a mix of an empowered and an
engaged consumer:
Financial
Financial
responsibility
responsibility
Public
PublicPolicy
Policy
Comparative
Comparative
quality
qualityindicators
indicators
Engaged Consumer
“Out-of-pocket”
“Out-of-pocket”
expenditures
expenditures
Connectivity
Connectivity
Social/Demographic
Social/Demographic
changes
changes
Empowered Consumer
E-health
E-health
Consumer
Consumer
Access
Accesstotovaluable
valuable
data,
data,that
thatconsumers
consumers
can
cantrust
trustan
anuse
use
Figure 23. E-health consumer. Source: Deloitte (2000).
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Patients are being required to pay an increasing proportion of health care services out of
their pockets, while simultaneously having access to many information sources and
decision support tools.
-
Connectivity. They have a wide spread mass access opportunity. Internet penetration
is high and growing with a new set of terminal devices and technologies, offering ondemand easy access, to better and more available information.
-
Social demographic changes. Home workers, and self-employed workers are
increasing, and is likely to continue to increase. In a non-compulsory insurance
environment (e.g. US) these represents a growing share of population that will tale
their own health care purchasing decisions. Other factors include waiting lists,
scepticism and loss of trust in practitioners’ work, etc.
-
Consumers are eager to gain access to scientific information that will help tem to
make informed choices. Simultaneously more and more sources of quality and
performance indicators are emerging, namely governmental agencies, managed care
organisations, pharmaceutical organisations, etc.
-
Financing trends and cost control policies, suggest that consumers are going to
assume a greater share of the economic burden of health care. And as consumers
become more financially accountable for their health care, they are likely to demand
more information to make better decisions as well as to search for less expensive
alternatives.
-
Public Policy. Besides the fact that health care has been a common priority in many
governments’ agenda, new legislation to increase efficiency and effectiveness trough
improvements in e-health transactions, to guarantee the security and privacy of
individual health information, as well as governmental institutions assessing the quality
of internet information and developing standards, is creating a trustful environment in
e-health practices.
Different authors questions if this consumers’ empowerment can be considered
productive, resulting in better health decisions. Internets’ different and contradictory
information and in many cases difficult to validate might lead consumers to confront
practitioners with irrelevant information, or to adopt dangerous health beavers. Still
patients’ expectation is growing as they aspect to be able to use Internet to:
-
Contact physicians by email and consult them online.
-
Schedule appointments
-
Prescriptions ordering.
-
Get referrals to specialists
-
Get diagnostic test results.
-
Chose and manager health plans.
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-
Customised solutions to meet their specific health care needs.
Recognising that e-health consumer’s empowerment can increase efficiency and reduce
health cost, Lerer (2000) argues that consumers’ education and empowerment should be
a key concern for all health players. An e-health consumer, he suggests, isn’t just the ill,
but the potential ill, the “worried”, and those adjacent to illness, patients, their relatives and
friends. And at first level, e-health services are an information driven activity, which is
mostly “event triggered”. Deloitte (2000) study suggests that the demographic profile of
the e-health consumer population reveals a significant population group with economic
clout, information sophistication and technological familiarity, and generally wealthy.
III.1.2. E-Health Providers
While the primary route to the consumer has been traditionally through the physician,
health care is moving toward a more complicated set of relationships. Every one is trying
to reach the consumer directly. And Internet as well as overall changing policies are
helping in that. In US pharmaceutical companies have been practising DTC marketing for
long, and now engaged online DTC. But while their efforts have generated a great deal of
awareness and traffic to their web sites, Deloitte (2000) states that they have yielded little
loyalty or trust. Physicians continue to occupy a key position, particularly in the area of
trust. And efforts to circumvent this key link are not working.
According to Deloitte (2000) the e-health market is currently highly fragmented and
consumers have no clearly preferences. They usually search around for whatever they
are looking for, but rarely having sites or models comprehensive, convenient or
trustworthy enough to engender loyalty. Bottom line, consumers are looking for physicians
to guide them through the morass of health information and services in the Internet.
Physicians and hospitals benefiting from traditional relations can emerge as the preferred
sources of trustworthy and reliable information and services for e-health consumers. And
so re-balancing the physician/consumer relation which as been weakened by the
empowerment of the consumers. According to Deloitte (2000) playing attention to the
Physician-to-Consumer (P2C) relationships will be a critical success factor for e-health
ventures.
Linking consumers and physicians online however doesn’t seem easy. Significant barriers
exist, including some technology discomfort, ethical and privacy concerns, and liability and
reimbursement issues. In addition physicians have concerns about the additional workflow
that is likely to result from online communication with patients. A large number of studies
refer that although most of them have access to computers and to the Internet, few fell it is
important to their professional practice. Stuart (2001) suggests that as they start to be
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confronted with the change in patient behaviour, they will be forced to keep place with
their patients' knowledge. Lerer (2000), states that practice patterns will become “e-based”
over time, and a new generation of health professionals will “grow into” the internet, as
technology becomes less intrusive and more facilitative of the provider-patient relation.
For health provider institutions, lack of real time, integrated patient records and poorly
coordinated care have been identified has one of the major contributors to medical errors.
Although most are still limited to institutional sites, e-health represents an opportunity to
offer better, meaningful, interactive services. Faster, wide spread, and simultaneously less
local resources demanding (bed’s, health professionals...), by shifting the site of care to
remote health institutions or ideally to the patient home, without having to send someone
there. While simultaneously providing health professionals with new information source
and decision making tools. Deloitte (2000) suggests that hospitals are the betterpositioned players to entering e-health business. They have strong community ties, a
traditional trustful relation with consumers and the strongest relationship with physicians.
III.1.3. Insurance Companies
The core business of insurance industry is information based. There is no physical
product to be produce or sale, as well as no need for pack-and-ship activities. Traditionally
this is a highly paper-based industry, and human agents are the most important
distribution channels. For most insurers, paper volume is achieving concerning
dimensions both in direct costs as well as in archiving, maintenance and accessing
procedures. Simultaneously, as a whole, the insurance industry is experiencing declining
profit margins and gross inefficiencies are commonly pointed. All these are pushing the
industry in the direction of Internet and e-Commerce.
Health insurers in particularly, are being faced with consumers’ empowerment, which
increasingly demands for the possibility to manager their health plans online. A recent
research (Delloite 2000) found that, among those consumers who seek health and
medical information on the Internet, more than one-third say they would be willing to pay a
monthly fee of $5 to manage their benefits online, and 25 percent would actually switch
health plans to do so. Adding to this, in US a federal directive, HIPAA (Health Insurance
Portability and Accountability Act) is practically forcing the industry to adopt an e-Business
strategy. HIPPA focus mainly in key administrative tasks, which must be achieved until
2003, but also establishes standards for privacy, security regulations.
As a consequence health insurers are "reinventing" their businesses from traditional
paper-based ones to ones that are streamlined, efficient, and Internet-based. Most have
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long been using web sites to market their organisations, products, and services, but when
it comes to conducting business online, the majority has few experience and seams to
focus first on administrative tasks. Consumers do, however, want convenience and 24hour access to their health plan for answers to questions ranging from health issues or
drug coverage, to provider networks, and claims processing status. They want to design
their own network of providers and to decide how much to pay over and above the
employer’s defined contribution to the plan. Donovan (2001) states that some insurers are
already offering online databases with real-time information and managing benefits
possibility such as enrolment, health claims filing and status, encounter information,
eligibility, payment and remittance advice, premium payments, and referral certification
and authorisations. Other are diversifying the offer including health risk assessments and
other steps toward self care management, and even (In US) direct links to online drug
retailers.
At the present stage of market development, health insurers have the opportunity to
positioning themselves in an important point working as a hub for connectivity between
Information
Funders
Funders
Telecoms
Telecoms
ISPs
ISPs
Technology
TechnologyProviders
Providers
Pharmaceutical
PharmaceuticalIndustry
Industry
Health
HealthProviders
Providers
E-Insurance
E-InsuranceCompany
Company
Infomediaries
Infomediaries
Consumer
Consumer
Figure 24. Insurance companies, positioning opportunity.
the patient and other sector players. And some are already developing especial
agreements with traditional and new market players. As an example Donovan (2001) cites
the Blue Cross Blue Shield of Pittsburgh case. Aiming to become Internet-based
paperless health insurance company it has developed a program to provide personal
computers and unlimited Internet access to members and employees with the help of
PeoplePC and to partner with Merck-Medco. Merck-Medo provides online patient services
in the area of prescription evaluation and dispense, and patient health management
programs. PeoplePC is an ISP, and equipment seller.
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Nevertheless several factors appear to contribute to slow Internet adoption by health
insurers:
-
Investment required is large. Legacy systems must be modified or replaced.
-
Privacy and security are vital in this industry
-
The industry is conservative by nature
-
Reimbursement of online health professionals’ activity is still highly controversy.
And while the consumer is considered the key driver of all businesses to the Internet, for
the health insurance industry, the key drivers for change will be those who pay the bills:
large private/public companies, the state or institutions, and those intermediaries who
might channel business to them.
III.1.4. Telecom Operators
Telecom operators movement into Internet business, aimes to control consumers access
points, and contents. This represented a vertical migration, which lead most into the ISP
business. In Telemedicine, they positioned them selves as a link, among sector players.
Not aiming to access the final consumer, but providing the means to do that, by
developing partnerships with health services providers. This two previously conquest
positions, put them now in a interesting place to offer health services to the final
consumer, as they already control the contents and have the right partners.
Most have some type of health information service in their web portals, and some have
developed special agreements with health providers for deeper services:
-
A Portuguese telecom operator (PT), as developed a service in partnership with a
local maternity, to enable parents to watch and fallow their sons, premature babies,
development, using a 24 hours available Internet site.
-
“Mobile Internet”, a sector newsletter magazine, in his June 15, 2001 edition, clearly
states that Health information could be WAP gap to be filled. Wireless operators will
take advantage from their high penetration levels as well as from technology
convenience, to develop and offer health personalised information to patients on the
move.
Their revenue sources are also growing as they begin to charge overheads for
information, implementing e-health ASP models, and developing joint services.
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III.2.
E-health Initiatives
E-health is a huge umbrella covering a large set of products and services. Under this
umbrella, different segmentations have been proposed. One of those is the “four Cs”
segmentation, which classifies e-health initiatives as belonging to one of the following
types:
Classification
Description
Examples
Connectivity
Initiatives who promote the
-
Electronic Medical Records (EMR)
linkage of health players in a way
-
Prescribing, test ordering ad reports
to reduce administrative staff,
-
Claims processing
paperwork, physician and patient
-
Online scheduling and referrals
time, and reduce inappropriate
-
Real time evaluation of reimbursement
and unnecessary care.
Commerce
Content
Care
eligibility
Initiatives who promote online
-
Online suppliers purchasing (B2B)
commercial transactions among
-
Online drugs purchasing (B2C)
health players.
-
Online insurance purchasing (B2C)
-
Infomediaries (B2B / B2C)
Initiatives who promote access to
-
Physician Information Portals
health information for providers
-
Consumers Information Portals
and patients.
-
CME applications
Initiatives who promote online
-
Online Support Groups
provision of care.
-
Contact Centres
-
Second Opinion
-
Risk Assessment Forms
Table 9. The “four C’s” model.
Other proposed segmentations include grouping e-health services according to
exchanged information types (Rice and Katz, 2000), and involved players.
This work aims to identify changes in business relations among health players, and new
services repercussions in health expenditure, efficiency and equity development. As so it’s
chosen not to use a strictly closed segmentation, because:
-
Although theoretically acceptable, in practice due to spillovers and joint products, ehealth services usually fall into more than one of each of these segmentation
categories.
-
An individual analysis of each isolated part, although possible, difficult the overall
picture of the service, aimed in this analysis.
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Most of the selected services have been pointed by Stuart (2001) as reflecting the
occurred changes in traditional relations among health sector players.
He classifies these developments as benefiting all players among the health care chain,
implying care that is more responsive, more efficiently delivered and better supported by
access to specialised knowledge and diagnostic resources. Patients receive services at
different venues (home, work, on-the-move — rather than going into hospitals or travelling
to tertiary referral centres) and the services themselves will be significantly altered
(greater patient control, real time, interaction, and more personalization). These
developments are leading to new business models such as online support groups and
contact centres. Rice and Katz (2000), refers the case of a health web site which offers
reverse-auction services for elective, nonemergency surgery. The service allows
consum ers to post their requests for a desired surgical procedure and give registered
physicians, the chance to bid.
III.2.1. Online Health Information
Internet is fast becoming an important alternative source of health information,
endangering the physician power. Plus, as consumers search for information grows,
health Infomediaries are emerging and positioning them selves fast.
Advertising
Acquisition and
monthly fee
Infomediaries
Infomediaries
Development and
maintenance
Information
Free / Per
service
fee
Telecoms,
Telecoms,
ISP’s,
ISP’s,
System
SystemIntegrators
Integrators
Air Time plus
monthly fee
Technology
Access
Old players
New players
Funders
Funders
Convention or
Per service fee
Money flux
Service flux
Consultation
Consumer
Consumer
Per service fee
Health
HealthProvider
Provider
Figure 25. Changing values in physician-patient relation.
In a first stage, offering one way communications, primarily news reports and information
about drugs and diseases (which is rapidly becoming a commodity). At a second level
through interactive health portals, offering information search tools, e-mail, and
communications between physicians and the community. The most advanced offer is
value-added transactions such as EMR and interactive disease management programs.
More and more information is becoming an assumed commodity.
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According to Deloitte (2000), players in this field are rapidly forming partnerships to
develop health portals and search engine capabilities. To establish credibility and to
solidify their positions, joint ventures are usually established with prestigious medical
organisations and Internet search engines. This allows them to attract users and
developed brands’ power.
Deloitte (2000) suggests that not only the supply of health information is growing but also
its quality and credibility. Search engines and specialised health portals are taking on a
strong editorial effort. Many are compiling and indexing health information, while a small
number of trusted services (normally state-related institutions) have begun to evaluate the
quality of health care information sites, and advising consumers.
Rice and Katz (2000), states that general use of e-health information sites grew 176% in
1999, to 10.800 million users, much faster that the growth in general Internet usage. A
presented survey indicates that nearly 70% of online users have researched a disease or
medical condition in the Internet. In the three most wanted sites it’s possible to find
information on disease (52%), information on diet and nutrition, pharmaceutical and
fitness (33%), and children’s health (15%). About one quarter of the disease related
searchers have joined an online support group.
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Alternative Medicine (526)
Business to Business@
Chats and Forums (55)
Children's Health (203)
Conferences (17)
Death and Dying@
Dentistry@
Disabilities@
Diseases and Conditions (8696)
Education (60)
Emergency Services (598)
Employment (110)
Environmental Health (192)
First Aid (18)
Fitness (157)
General Health (92)
Health Administration (65)
Health Care (339)
Health Sciences (33)
Hospitals and Medical Centers (44)
Institutes (35)
Law@
Long Term Care (107)
Medical Geography@
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Medicine (5037)
Men's Health (40)
Mental Health (800)
Midwifery (58)
News and Media (190)
Nursing (481)
Nutrition (219)
Organizations (22)
Pet Health@
Pharmacy (1308)
Procedures and Therapies (462)
Public Health and Safety (2308)
Reference (93)
Reproductive Health (709)
Senior Health (89)
Sexuality@
Shopping and Services@
Teen Health (25)
Traditional Medicine (199)
Travel Health and Medicine (25)
Web Directories (54)
Weight Issues (94)
Women's Health (171)
Workplace (70)
Figure 26. Yhaoo health major categories.
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A search on “health” in two major Internet search engines (Yahoo and AltaVista)
conducted to nearly 16.000 Internet sites categorised at prime tire in both yahoo and
AltaVista directories. Many are commercially based. Drkoop.com one of the most popular
online health sites has evidenced nearly 1.5 million hits per day in 1999.
III.2.2. Online Support Groups
Online support groups enable individuals with a specific health concern to “congregate” on
the Internet for mutual support and information as well as gaining expert assistance. It
overcomes geography, time and culture, promoting the development of a common
knowledge. They vary in subjects, level of interaction, level of clinical monitoring and
availability, and in level of public access. Most groups are either self-moderated by a
patient or caregiver or by an advice nurse, who might or not be compensated. Usually
they are developed by individuals or a health related institution, and can present different
types of sponsors. Support groups sponsored by health care organisations are often a
marketing or revenue-generating tool (crossing with e-health commerce solutions).
Hospitals and research institutions (namely pharmaceutical industry) some time use them
to identify and recruit clusters of patients, which typify a certain type of illness, for engage
in clinical trials. Some commercial groups mine and integrate, groups collected data and
resell the information.
Some health care organisations defend that correct patient empowerment can be
achieved through support groups, resulting in reduced costs and healthier patients. Others
suggest that they can easily be used as a lobby tool. As they increase in number and
knowledge, they are becoming increasingly influential, with increasingly lobbying for
access to new treatments and directly confronting health authorities on resources
allocation and quality issues.
Sponsor
Health
HealthProvider
Provider
Others
Others
Finance
Regulation
Pharmaceutical
Pharmaceutical
Industry
Industry
Hosting
moderation
Advice...
Compiled
Information
Infomediaries
Infomediaries
Research
Research
Policy
PolicyMakers
Makers
DTC Marketing
Sales
Clinical trials
Information
Information
Lobby
Support
Support
Group
Group
Figure 27. Support groups value position.
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III.2.3. Remote monitoring of Chronic Conditions
Chronic ill patients, in need of home healthcare, already transferred the site of care from
the health institution to their home. But usually they are highly dependent on specialised
care, and services to the home. In many cases home-health visits, might be replaced by
Internet based video conferencing systems or data acquisition and processing
equipment’s. These can acquire patients biologic data and send them to a evaluation
centre, where remote monitoring systems can warn the patient and their doctor of
deterioration in health conditions, and if needed a health professional, can be send
immediately to provide on-site treatment, increasing the likelihood of timely responses to
the onset of a medical crisis. Such technology applications have the potential to greatly
increase the success of the health system in preventing acute illness and reducing
hospitalisation.
Stuart (2001) states that such systems are already being used for the monitoring of
cardiac patients, patients with high blood pressure, children with asthma and those with
diabetes. Many times they cross with online contact centres and integrate EMR.
DiabetsNet (http://www2.sw.org/dnet/index.htm), is an Internet site positioned to chronic
diabetes patients. In general terms it offer three sets of services:
-
Health information. A personal health management plan with self care practices. A
diabetes education manual, Scientific developments, FAQ’s…
-
Contact tools. It offers the possibility to join online support group, plus a mailing list.
Both free of charge.
-
E-mail consultation. An e-mail connection to the endocrinology staff, to special advice
and consultation.
The site is sponsored by Scott&White, a health institution that also owns a hospital, and
mangers a health plan. The DiabetsNet has direct links to all these, and presents special
benefits to S&W patients. As an example only these can have access to the virtual
Endocrinologist.
III.2.4. Online Consultation
Although some physicians are using e-heath solutions to administer on-site diagnoses to
patients in need, they are still a minority, and most state that their intention is to
complement, not substitute, traditional doctor-patient relation.
The development of online consultation for a fee, has been developing slowly, even in US,
due to a set of factors like the lack of clear licensing policies as well as physicians
technology reluctance, and reluctance of insurance companies to reimburse online visits.
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As in Telemedicine pure services, e-Teleradiology seems to be a slightly leading, as it
doesn’t requires human face-to-face presence.
Rice and Katz (2000), state those online physicians, providing advice in chat-rooms or
other “ask-a-doc” services, frame their activities as patient education rather than
physician-patient consultations. Some explicitly state that the exchange of electronic mail
or chat, between the user and the physician does not constitute the bases of a physicianpatient relationship and will not be accorded the same protections.
III.2.5. Online Continuos Medical Education
The increasing rate of the developments in the medical field makes it hard for physicians
to stay abreast of the latest relevant treatment information. Rice and Katz (2000) suggest
that an information and knowledge gap exist among the medical research community, the
specialised practice community, and the general practice community. This is even greater
among remote/isolated physicians. Continuous medical education (CME) needs have
been broadly recognised. Present solutions assumed many different forms, from on-site
training to more recent Telemedicine distributed networks, using videoconferencing and
diffusion technologies. Nevertheless most remote CME were poor in interaction, required
expensive equipment, and imposed specific meting schedules
Web-based CME is one of the more mature e-health applications and is used routinely in
many places, covering numerous specialities and topics areas. And it continuous to
expand, as medical groups, training programs, hospitals, and specially societies begun
making their CME materials more available on World Wide Web sites.
Rice and Katz (2000) state that health providers will find it necessary and desirable to
employ the Internet for health-related education for three major reasons:
-
Actualisation. Health providers will find it more and more important to be current in the
latest treatment options, as patients now come to the office armed with internet
downloaded information.
-
Costs. To providers it reduces expensive meeting spaces, the rental of audiovisuals
equipment, as well as travels expenses and accommodation costs. To physicians it
eliminates costly trips to CME conferences, and reduces revenues while they are out
of the office.
-
Generation gap. An emergent new generation of younger health providers highly
familiarised with Internet environment.
Compared with traditional solutions, online CME offers advantages and rises some
concerns:
-
It provides a very low-cost way of presenting CME.
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-
Enables a much larger target.
-
Promotes convenience, through asynchronous delivery.
-
Enables rapid computations and advanced programming for interactive learning,
including simulations.
-
Allows quick text search, retrieval and storage.
-
Can promote interactivity, through multi-user applications.
On the other hand developing an online curriculum can be extremely expensive. Plus
bandwidth capacities might compromise real-time applications, or required significant
amounts of time for downloading asynchronous course materials. And courses quality and
credibility his highly questionable.
While increasing utilisation of the web for CME seems wanted and inevitable, the future of
those competing to be CME providers is less clear. Presently competitors include public
and private hospitals, universities, research institutes, etc. Many times under a 3r d part
(Telecoms, ISPs, Pharmacos) brand or Internet hosting sites. And implementing complex
models of revenues sharing, ranging from ASP, traffic, inscription cost, brand promotion or
products marketing, etc
III.2.6. Online Contact Centres
Medical call centres where patients can find qualified support have been in operation for
the past ten years. They are a simple, low expensive way to provide information and
enhance access to health services. Coupled with other low-tech solutions like audio text
health libraries, EMR, Internet, mobile equipment, and customer relationship management
tools (CRM), call centres have evolved into "personal healthcare management" contact
tools. Usually a patient accessing a contact centre is looking for reassurance, for advice,
for education, or for triage to a care centre as necessary. Contact centres integrates and
control patient touch points, and their ability to solve or re-direct patients to appropriate
services, offers a critical and increasingly important interface between health players and
consumers, improving patients and family satisfaction while reducing clinic waiting times
and unnecessary higher expenses.
Usually a large number of income contacts are anxious patients, who can be managed
with home care advice or routed to physician's office in the next day if necessary. Only a
short number will need immediate personal attention, and they can immediately be routed
to the right place.
When the patient access an Internet contact centre, it is usually given to him the option of
being connected to a health library for self-education, or to be connected to a health
professional. The self-education tool is used to reduce the amount of time health
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professionals need to spend giving basic information and allow the contacts that are
subsequently pass to the health professional to be handled more efficiently. Usually a
large number of income contacts are anxious patients, who can be managed with home
care advice or routed to physician's office in the next day if necessary. Only a short
number will need immediate personal attention, and these can immediately be routed to a
hospital emergency room or other appropriated site.
Most times contact centres integrate patient’s recent medical history (EMR) and their
doctor and insurance information, enabling consumers to know immediately if their visit to
a provider will be covered. As they usually can work both in inbound and outbound, they
also allow to proactively push information on new therapies and service options out to
known at-risk patients.
The cost of enrolling each patient in a medical contact centre service varies depending on
the size of the contracting insurer and other factors. Services vary from basic library and
advice to risk assessment, health events counselling, compliance monitoring, outcomes
measurement and disease management. A 1998 study from the US Centre for Corporate
Health showed that for every $1 dollar invested in a telephone-based health management
system, $4.75 was saved through better use of resources and self-care. Although no
concrete numbers were found, is easily acceptable that contact centres will decrease this
ratio even more, due to the offer of new services as well as by using less costly
communication platforms.
III.2.7. Electronic Medical Records
Electronic Medical Records (EMR) started with Telemedicine first projects, offering a
secure, easily and rapidly way of exchanging patients’ information as they move around.
Although their advantages were commonly accepted, still real full integration is rare. A
patient forced to access different parts of a country health system, will probably have his
life time health record split among different organisations. Standards have been created to
ensure data correct interchange, still is necessary to convince all parts to acquire
necessary technology and accept to join together that data under a common consolidated
record with actualisation procedures.
The high costs associated with private wide area networks, confronted with Internets’ low
cost and wide spread coverage has been leading to its adoption as transmission
infrastructure. Still EMR rise many concerns. There are a lot of mixed positions
concerning security, confidentiality and utilisation issues. In some countries, patients are
demanding the right to see the information that’s held on them, and questioning to whom
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does it belong, to the health provider to the insurer, to the patient or both. What kind of
use will be made of it, and so on.
A huge effort of EMR standardisation and access his being made in the UK. Analysing
this, Bell (2000) states that Internet is being used to connect all parts of the NHS and
other organisations like Social Services. He points a set of information sources and the
type of uses that as been given to the EMR in UK, namely:
-
Routine patients care. A network that ensures that wherever a patient goes, whatever
support we needs, with the UK’s NHS, a full EMR will be made available.
-
24 hour care. A triage service, covering the all UK.
Mental
Mentalhealth
health
services
services
Patient
Patient
accessible
accessiblerecords
records
Community
Community
services
services
Supporting
Supporting
24-hour
24-hour
care
care
Electronic
Electronic
Medical
Medical
Record
Record
Routine
Routine
patient
patientcare
care
Hospital
Hospitalbased
based
records
records
Aggregated
Aggregated
anonymised
anonymised
subsets
subsets
Social
Socialcare
care
records
records
Developing
Developinghealth
health
improvement
improvement
programmes
programmes
Clinical
Clinical
governance
governance
Epidemiological
Epidemiological
research
research
Figure 28. Creating and using EMR in UK. Source: Bell (2000)
According to him the existence of a NHS that can centralise information and pressure
health organisations to engage, facilitates the development of such services and
applications. Although the system is still in an embryonic stage, he sustains that
expectation point for large net savings through illness early detection, and more
appropriated care. Simultaneously it will enable trustful and more complete R&D
information.
The interest of insurer companies (as AXA in UK case) is high, as they can provide new
add value services, reduce expenses due to the application of better adequate therapies,
and exercise a straighter control over insured population abusive patterns. In other
countries (e.g. US) pharmaceutical industry is also highly contributing to the development
of such systems in closer partnerships, as they represent the opportunity to identify illness
clusters, and ease recruitment for clinical trials.
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III.2.8. Electronic Procurement
E-procurement it’s wide spread among the US health sector as well as in many EU
countries. The strongest of this in the health sector, results from his acceptance and
common use among different sectors for quite some time (B2B, auctions…). It’s a wellknown and tested tool of e-commerce, with both suppliers and purchasers gaining from
lower transaction costs.
Suppliers
Suppliersown
own
catalogues
catalogues
E-markets
E-markets
Horizontal,
Horizontal,vertical
vertical
marketplaces,
marketplaces,
consortium
buying,
consortium buying,
auctions,
auctions,etc
etc
Supplier
Supplierweb
website
site
/buy site
/buy site
Company
Company
e-purchasing
e-purchasing
System
System
Multi-supplier
Multi-supplier
catalogues
catalogues
Catalogue
Catalogueservices
services
providers,
providers,
hosting
hosting
Figure 29. E-procurement.
Analysing Aventis’ e-procurement practices and goals, Bradley (2000) states that in a first
stage drivers lied on information and purchasing cost reduction. Expectations where for a
second stage focused on supply chain improvements, and in the future the improvement
of relationships, working closer with suppliers to improve products.
PRESENT
2nd STAGE
FUTURE
DRIVERS
- Cost reduction
- Supply chain efficiency
& effectiveness
- Product improvement
CONTENT
- Direct & Indirect
e-sourcing
- Market to market
connections
- Auctions
- Order processing
- Payments
- Shared production
forecasts
- Visibility of inventories
- Shared manufacturing
information
- Collaborative planing
- Co-operative
engineering
- Shared services
BENEFITS
- Optimise supplier base
- Improved management
information
- Reduce transactional
focus
- Reduce inventories
- Flexible manufacturing
/ supply
- Reduce lead times
- Improve supplier
relationship
- Product improvement
Table 10. Aventis e-procurement expectations. Source: Bradley (2000).
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Similar to Bovet and Martha (2000), Bradley (2000) states that the traditional two
dimensions supply chain is a lot like a relay race with information and materials moving
sequentially up and down the chain. Parts at end of the chain often don’t know what’s
happening at the other end. In the best scenario each enterprise in the chain has a view of
it’s immediate neighbour and even then the information may be out of date or incomplete.
These leads to the usual problems like brakes and delays in the supply chain, high lead
times, high inventories and very high costs. He states that e-procurement and Internet in
general term, can be used to improve the connectivity with suppliers and create three
dimensional supply nets (value nets). He expects that Aventis e-market place will ease
information exchange among value chain participants, improving visibility of real time
supply information to all participants. All participants will be able to see inventories and
production plans and relate these to their order status. The increased visibility will improve
responsiveness and reduce league times, allowing to better evaluate demand and
forecasts, and be better equipped to manage inventory levels.
The following stage would be to increase access to the functionality hosted on the emarket to these participants and eventually collaborative work.
PROBLEM
SOLUTION
BENEFIT
- Break in supply chain
- Problems seen
immediately
- Increase reaction time
- High lead time in order
processing
- Order status available better decision making
- Reduce lead time
- Slow response to
forecast change
- Forecast change advised
in real time - improved
decisions
- Improved response lower administration
costs
- Lack of visibility
- Increased visibility of
orders to forecasts
- Reduce errors / returns
- High inventories
- Increase visibility of
inventories through the
supply chain
- Lower inventories,
vendor managed
inventories
Table 11. Aventis expected benefits from his value net. Source: Bradley (2000).
Bradley (2000) recognises that the direction in which Aventis e-procurement activities are
evolving is leading to the development of a private vertical e-market place. While buyers
want a common buy side solution for all their suppliers, sellers will want common
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standards. Nevertheless as he points, the development of an industry e-market standard,
his highly conditioned by companies developing stages and conflicting interests.
III.2.9. Health Portals
Portals are a typical case of low cost, intermediate form. They implement sophisticated
process of market segmentation, aggregating both customers and suppliers. To
consumers it’s given the possibility to easily search, compare and buy products, as well as
the security of portal credibility. The suppliers get the visibility so needed to succeed on
the net. Portals can profit from publicity, percentage over e-commercial transactions, and
new services providing, like customers relationship management (users develop a relation
with the portal, allowing him to aggregate and manager all available services, as well as
the opportunity to implement and charge CRM services to suppliers companies). Portals
are usually classified in, vertical, horizontal, B2B, B2C, C2C… this classification reflects
the business model behind the commercial transactions. Vertical and horizontal portals
were the first to emerge, joining interest groups over a certain subject, or leading Internet
drifters into a set of services (free e-mail, chat rooms, news…).
Physicians and health consumers’ portals although innovative in the health sector, are
based on the same philosophy of other industries internet portals. They are mature
business models.
Planet Medica is a European e-health company working on the consumer portal business,
with operation in England, France, Germany and Spain. The sites’ structure offers
information about medical conditions and drugs, a self-assessment questionnaire to
estimate for example, patient diabetes risk, and a bulletin board for user to swap medical
experiences. The service does not offer diagnosis or prescriptions online, instead it is
stated that it is intended to complement rather than to overcame traditional physicianpatient relations. Planet Medica is also developing web-CME services for physicians and
other health care professionals, supplying technical information on clinical decisions. The
firm is also doing deals with insurers for streamline administration, providing their clients
with details of how much “the care” will cost, how much the state reimburses and how long
it will take.
III.3.
E-value proposition for Pharmaceutics Industry
Unlike other parts of the health care system, pharmaceuticals are an international
manufacturing industry, in which research and development plays a key role. A core
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concern among health policies, is how to choose between providing pharmaceutical
companies with adequate incentives to undertake R&D in a costly and uncertain
environment, versus handling the monopolistic situation that is created when successful
drugs under patent protection are introduced. These specific characteristics place
pharmaceutical activities in the private sector. Pharmaceutical expenditure represents
about 15% of total health expenditure in OECD countries and has been rising steadily as
a share of GDP since 1970.
EXPENDITURE ON PHARMACEUTICAL GOODS AS % OF TOTAL EXPENDITURE ON HEALTH
1960
Australia
Belgium
Canada
Czech Republic
Denmark
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Italy
Japan
Korea
Luxembourg
Netherlands
New Zealand
Norway
Portugal
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
OECD average
22,3
24,3
12,9
17,1
22,1
26,8
16,7
19,8
1970
1980
1985
1990
1991
1992
1993
1994
1995
1996
1997
1998
8
15,7
9,6
12,6
23,2
16,2
25,5
6
10,7
15,9
13,4
18,8
6,6
9,7
16,2
13,8
8,9
15,5
11,4
21
7,5
9,4
20
14,3
14,5
16,1
22,2
14,5
15,9
10,9
13,7
16,6
9,9
17,8
18
28,7
14,8
8,6
13,3
9,1
25,4
20,3
7
8,9
13,2
14,1
9
15,7
11,1
18,3
21,4
25,7
14,9
9,1
13,8
7,2
24,9
17,8
8
8,2
20,5
13,6
9,2
9,4
15,6
11,7
18,4
8
9,9
20,6
14,3
14,4
27,3
14,3
10,6
17,9
22,9
26,8
15
9,1
14,1
7,3
24,3
18,3
8,7
7,8
9,8
16,3
12,2
21,1
7,9
10,8
20,5
14,2
17,4
26,3
15
10,3
18,1
22
25
10,3
17,4
12,8
19,4
8,5
12,3
20,9
12,4
17,8
28,2
14,4
9,8
18,1
22,3
24,3
9,9
14,2
7,5
24,7
18,6
9,7
7,4
10,4
14,9
9,6
25,6
18,6
10,7
7,6
11,1
16,2
13,6
25,6
9,1
14
21
12,3
17,3
25
15,6
9,5
16,7
21,5
21,9
12
10,4
14,8
9
25,2
19,6
12,5
7,7
11,4
15,4
13,8
25,5
8,9
14,4
21
12,4
17,9
26,3
16,6
9,5
17,3
21,3
19,8
11,5
10,4
14,5
9
26,3
20
12,9
7,6
11,3
16,1
14,5
25,3
9
14,8
21,3
12,2
17,2
26,4
16,3
9,3
17,5
20
17
12,6
10,3
14,4
9,1
26,9
20,7
12,8
7,7
13,9
9,1
14,3
8,8
14,9
8,6
10,9
17,5
12,9
24,7
8,8
13,3
21
12,4
16,8
28,2
15,1
9,6
17,4
21,1
22,7
12,2
10,3
15,8
8,8
25,2
18,5
11,9
7,5
31,6
15,3
8,6
11,4
28,1
11,3
7,9
17,4
8,5
15,4
8,9
15,7
9,2
16,3
9,6
10,1
12,545 13,665217
14,476
15,083333 15,408333 16,080769
15,436
15,544
15,544
15,227778
19,7
7,8
13,4
6,6
16,6
14,7
12,4
19,844444 16,286667
14,5
7,4
11,9
8,7
19,9
21
6,5
12,8
9,1
14,788
15
25,5
9,2
14,6
21,9
12,7
14,7
26,5
15,5
9,9
16,8
13,8
12,3
10,8
25,8
7,6
Table 12. Total expenditure on pharmaceutical goods % Total expenditure on health. Source:
OECD Health data 2001.
The growth in pharmaceutical expenditure raises concerns in terms of their affordability,
and increases pressure on the financing of health care systems. At the same time, it
makes a significant contribution to the reduction of mortality and morbidity. As a
consequence, pharmaceutics industry continues to be a major cost driver as well as an
important contributor to improved performance of health care systems.
A US based web site, sponsored by a pharmaceutical company, allows Type 2 diabetes
patients to register, having their prescription drug delivered directly to their home. Patients
are also given the opportunity to participate in a disease management program offering
free testing, educational materials, a diabetes newsletter, and appointment reminders for
physician visits and lab tests. Analysing Internet impact and risen opportunities to the
pharmaceutics industry, Hudson (2000), salient the following aspects.
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-
Mass market of one. It offers a mass communication channel, allowing reaching
millions of people (patients as well as health professionals), one at a time in a
personalised, and convenience enabling mode (24h availability).
-
Customer segmentation and personalised Marketing. It supports coherent positioning,
knowledge-based sales and marketing actions, by better patient’s knowledge and
direct access, with branding and sales repercussions.
-
New balance of power. It allows a mass sales channel, with large impacts among
supply chain players.
-
Individualised medicine. While participating in patient empowerment it allows
pharmaceutical companies to improve diagnostic procedures, accessing online
patients clusters
III.3.1. Online Drugs Advertising
Advertise the benefit of drug therapies directly to consumers (using e-channel or not) is
illegal in most countries. Usually most of the marketing is being done trough the physician,
but a growing pressure is being placed over governments to allow direct-to-consumer
marketing (DTC). Advertising prescription drugs is forbidden in the EU, although recently
drug associated companies have been allowed to post patient-information packs on their
web sites. Online pharmacies and others can thus provide links to such corporate web
sites, earning referral revenues from drug companies. In the US pharmaceutical industry
have been communicating directly with consumers through media advertising for several
years, and more recently through the Internet.
Analysing previous e-channel experiences in DTC marketing in other sectors, Hudson
(2000) questions their success and if in e-health they will succeed:
-
Customer profiling. The intention of developing market segmentation and micro
marketing, based on consumers’ patterns, namely tracking web sites usage, has been
affected by privacy concerns.
-
Individualised messaging. Individualise information massaging, based on interest
groups and consumers purchase history, highly contribute to e-mail boxes overflow,
and become unwelcome.
-
Dynamic content. Relevant messages that automatically “bubble” to top, are usually
complex and expensive methods with unfavourable ROI.
-
Collaborative filtering. Cluster segmentation messages, using filters like “people who
bought this book also bought…”, usually fail for lack of relevant data.
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He states that in pharma, target population is more homogeneous than usual and the set
of products being sold is diminishing small compared with other sectors. A major pharma
company makes 80% of its profits from between 4 to 5 drugs. He also blames DTC emarketing for the presently unbalanced patient/physician relationship. Consequently he
suggests that new tactics are required in health e-marketing, exploring the empowerment
of the consumer while promoting physician role. Two tactics he suggests pass by
developing health professional oriented information tools and health professionals web
hosting.
DIRECT TO CONSUMER
WEB MARKETING
PHARMA
R&D
SALES REPS
HEALTH
PATIENT
PROFESSIONAL
HEALTH PROFESSIONAL
INFORMATION TOOL
Traditional
Information
Channel
HEALTH PROFESSIONAL
WEB HOSTING
Figure 30. Pharmaceutics information E-channels. Source: Hudson (2000)
The first will deliver information in a convenience bases, considering that the process has
to be triggered by the health professional, in opposite to the tradition sales represents
approach (sometimes unwelcome). The second will promote web patient/practitioner
relationship under the pharmac industry branding.
This form of customised marketing will allow the development of “intelligent” relationship
where the provider learns from the consumer about the decisions they make and the
preferences they state. While the pharmaceutical company strongly promotes brand and
captures consumers preference, who as discussed earlier doesn’t appear to exist..
III.3.2. Online Prescription
Medication errors represent an important cause of death. Common causes of serious
medication errors can be stratified in prescribing errors, dispensing errors, and
administration errors.
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Prescription errors are usually associated with failure to access basic clinical drug
knowledge prior to prescribing. The information is available somewhere, but it's difficult to
quickly access, and, at the same time, health professionals are faced with an everexpanding pharmacology knowledge base, including new medications, dosages, adverse
reactions and other prescribing data.
Internet prescribing systems are decision-support tools, introducing significant changes in
how drugs are used and monitored. They can be sophisticated aplications tested to
improve clinician prescribing practices, avoiding medication errors, while simultaneously
saving time and improving health professionals knowledge. They provide a clinical drug
database, specific disease treatment guidance, formulary decision support tools, and
electronic prescribing. They link patient diagnosis, EMR, and available medication,
including generic alternatives, health plan formulary status, drug utilisation reviews,
disease management information and physician prescribing pattern indicators.
When a physician selects a drug therapy to be prescribed, the system can prompt
whenever a generic equivalent or therapeutic alternative is available. In addition to generic
status, the system prompts the user by identifying drugs as either preferred, approved or
non-formulary. Before the prescription is completed, the cost-effective options are
identified for the provider, allowing the provider to make an informed choice.
These tools can increase prescribing of generic medications, with consequent savings.
Simultaneously, by eliminating hand-written prescriptions and replacing it by electronic
one, that can be automatically routed over the Internet to the local pharmacy, a mail-order
pharmacy, an Internet pharmacy, or a managed care organisation, reduces costs and
assure a correct interpretation of the prescription. For institutions with their own pharmacy,
benefit from stock management can also been achieved with automatic purchase to
suppliers via Internet.
On the other hand implementation of enhanced prescribing systems can be extremely
costly. Development of software, purchase of needed hardware, education and training of
clinicians, and communication with all users are critical factor. Also, after a new system is
implemented, technical support and appropriate education are needed.
Potential target for Internet electronic prescription tools includes GPs, Hospitals,
ambulatory care, pharmacies, and funders for reimbursement. The prescription claim is
submitted electronically by the pharmacy and processed electronically by the insurer and
feedback regarding payment and possible drug therapy problems can be provided
immediately, online.
Tucker (2000) states that in several countries around the world, particularly in the US, and
Sought Africa, Internet based electronic prescription is already available. However in US
those who want to sell conventional drugs face some obstacles, like the lack of a country
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regulation which allows many prescription singularities do to state-to-state regulation. In
the EU online prescription is not allowed, plus EU’s “distance –selling directive”, permits
member states to ban mail-order pharmacy, and by extension, Internet-based sales.
III.3.3. E-Pharmacy
Traditional pharmacies are a middle link in the health care supply chain with a short
geographic coverage but with direct access to consumers and consequently a strong local
influence on consumer beaver, but little influence in global chain.
R&D
MANUFACTURE
WHOLESALER
PHARMACY
CONSUMER
Figure 31. Pharmaceutical supply chain.
Similar to other retail activities Internet offers an alternative access channel, with
disintermediate consequences in the supply chain. In a first approach the E-Pharmacy will
be able to cut out the wholesaler, talking directly to the e-pharmacy.
R&D
MANUFACTURE WHOLESALER
PHARMACY
E - PHARMACY
CONSUMER
Figure 32. E-disintermediation in pharmaceutical Supply Chain.
But a second disintermediation level is also possible where the manufacture talks directly
to the patient, using their databases to find target patients and directly manage their
medication in an interactive way. The pharmacy service can account for over 25% of the
final cost (excluding taxation) of pharmaceutical products (EU 1998). This second stage
although possible doesn’t look like a short time reality. It didn’t happen in other retail
activities, and more than in other sectors, as Tucker (2000) mentions this sector is highly
dependent on regulation and consumers’ empowerment, which is still developing.
Simultaneously, physicians might felt uncomfortable to referral patients to a specific
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manufacture, as well as some consumers might be reluctant to disclosure personal
information to Pharmaceutical companies.
To pharmacies, besides cutting out wholesaler with consequent products margin growth,
e-pharmacy represents the opportunity to improve patient relation offering 24 hours
availability, country geographic independence, and a click and mortar purchasing method,
while developing new services and revenue sources.
In Europe UK seams to be leading e-pharmacy movement with a set of pilot projects, and
undergoing regulation. The first UK online pharmacy service was Pharmacy2U, launched
in November 1999, which was used as a pilot to develop guidelines for Internet
Pharmacies in UK.
Figure 33. Pharmacy2U Internet site.
It currently offers B2C products and services with four major sets:
-
General Products. A full range of non-prescription medicine products, vitamins and
complementary medicines, beauty products, etc.
-
“Ask Our Pharmacists”. Provides on demand advice to best available medicine
according to patients’ symptoms, allowing pharmacies to build up straighter patient
relations while developing their own personalised medical records. Information is given
using e-mail, telephone or even Internet based face-to-face talk. Although they sustain
that is not their intention to overcame practitioners role, there is a old intention among
many pharmacy associations and professionals, to expand their activities and this
looks like an interesting opportunity, Tucker (2000). For instance, possess of patients
personalised medical records allow pharmacies to approach specific sets of patients,
inviting them to participate in clinical trials, assuming an important position face to
manufactures.
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(2%)
(3%)
(2%)
(1%)
(2%)
(4%)
(0%)
9%
2%
3%
2%
1%
2%
4%
0%
57%
15%
Pharmacy Meds
GSL Meds
Healthcare 1
Natural Health
2
Personal Care
3
Beauty
4
Perfumery
5
Mens Products
6
Infant and Baby
Disability 7
Prescriptions8
(57%)
(5%)
(15%)
(0%)
(4%)
(2%)
(1%)
(2%)
(3%)
(2%)
(9%)
9
5%
The top 5 categories of Medicines
10
- Hair and Scalp
- Pain
11
- Indigestion
- Coughs/Colds
- Smoking
Figure 34. Online Pharmacy purchase in the UK. Source: Tucker (2000).
-
Health Information. Offers an encyclopaedia of health and medicine, and includes
community chat.
-
Prescriptions. Pharmacy2U can dispense prescriptions, if written by UK registered
prescribers, and send them free of delivery charges at consumers’, within 1 to 2 days
of receipt. If the prescription is NHS originated, as the UK NHS requires Pharmacies to
possess a paper prescription before making the delivery, a prescription registration
form should be fill, after which the form plus the original medical prescription and a
payment method prescription should be sent to a freepost addresses. Pharmacy2U
can only dispense prescriptions written by UK registered prescribers. If the
prescription is private originated, Pharmacy2U developed agreements with private
insurance companies, allowing them to dispense the prescription without the need for
a form.
Comparing UK and US e-pharmacy potential Tucker (2000) suggests that although eprescription is already possible in some US states, state-to-state regulation of e-Pharmacy
limits geographical scope advantages of Internet. Also, lack of a NHS difficult agreement
development with funders. On the other hand in UK the number of people purchasing
prescription drugs online is growing fast, and the government aggressively supports eprescription aiming to lead the way in EU market. According to him with proper safeguards
and professional standards, the UK NHS recognise in e-pharmacy the potential to ensure
new high quality services, re-designing traditional ones around patients, providing a better
access and helping patients to get the best from their medicines.
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Tucker (2000) states that although companies like Pharmacy2U, are ready to immediately
dispense electronic prescriptions it isn’t yet allowed by regulation. Never the less it’s
expected that by 2004 every NHS GP will have the ability to transmit prescriptions
electronically to a pharmacist, with already undergoing pilot projects.
PHARMACY ACTIVITIES
BEFORE
CORE BUSINESS
PRESENTLY
- Prescription dispense
- General products sales
- Prescription dispense
(paper and electronic)
- General products sales
- Home delivery
- On-line advice
- Health information gathering and
supply (to patients & manufactures)
TARGET MARKET
- Local (geographic limited)
population.
- Decentralised patients
- General population
- Manufactures
BUSINESS PARTNERS
- Health providers
- Funders and policy makers
- Wholesalers
-
- General products Sells
- Prescriptions margins
- General products Sells
- New prescriptions margins
- Services Sells
REVENUE SOURCES
Health providers
Funders and policy makers
Equipment developers
Systems Integrators
Manufactures
Table 13. Major changes in Pharmacy business.
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III.4.
Costs and Benefits
Lack of Information, imperfect communication, induced demand, lack of competition,
limited geographical coverage, among others, are problems facing most countries health
sectors, strongly contributing to inefficiencies in the provision and management of health
with repercussions in expenditure and health quality. Among health care players expected
benefits in using e-health solutions include universal communications capabilities,
geographic coverage of undeserved populations, illness early detection, treatment and
prevention, improved physician-patient relation, improved decision making tools, faster
intervention response, emotional support and succour…among others.
Already exiting solutions do confirm Internet potential to improve some of these fields.
Large savings in B2B areas, are being reported by US players, as a consequence of
Internet adoption, through reductions on administrative costs, transaction costs, personnel
expenses and paper related supply expenses. Nevertheless, some point that this are
gains in business processes, which are different from the delivery of health care. They
suggest that health expected benefits, and gained efficiency by Internet use, can be less
visible or quantifiable and require high initial investments.
Lack of information
Imperfect information is one of the traditional problems affecting the health sector. It
affects all players, with special impact among consumers and providers.
Consumers traditionally have little information about illness, treatments and appropriated
providers. They used to relay on physicians to advice and appropriate treatment. Internet
brings an unprecedented source of free information on diseases, treatment, products,
providers, etc. This is pushing consumers development to a new wave of “empowered”
consumers, who hopefully will engage in better health practices, moving from treatment to
prevention, and taking a better oriented and less expensive use of health services.
For physicians, understand symptoms and know the best course of treatment, demands
permanent actualisation. Nevertheless the rate of change of medical technologies and
practices outpaces the ability of most providers to keep up. Isolation, costs, schedules are
among the major reasons for information gaps. Their consequences can be unnecessary /
inefficient treatments, with important impacts on health expenditure. Physician-oriented
portals address this information gap, offering online access to medical information
decision support systems, CME, etc.
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Imperfect Communication
According to Rice and Katz (2000), nearly 75% of all business activities in health care are
related to the capture and manipulation of information, most of which is paper based. It
includes EMR, claims, referrals… .Web-enabling these processes can significantly reduce
overhead costs while improving the delivery of health services. Furthermore, interorganisational web-based systems can lead to the establishment of more efficient and
effective relationships among health care players.
Patients’ health information has been highly fragmented across many health institutions
and providers. Contributing for administrative costs (faxes, phone calls, mails…), and
inappropriate care (due to lack of information). Internet facilitates the development an
integration of EMR among all players, by connecting and centralising or synchronising
spread data, while reducing administrative costs. The speed and adequacy of reaction,
also contributed to therapeutically success reducing medical costs.
Funders and providers relations his highly ambiguous. For one side funders depend on
physicians to determinate appropriate care to be delivered to a patient. On the other hand,
they strive to limit unnecessary expenditures. As a consequence, there is a lot of paperbased information being exchange among them (authorisations, claims, reimbursement
forms…). Internet allows for a better, real-time, communication among parts resulting in a
deeper control of care quality and less administrative and paper costs.
Competition
Although price competition in health care has been recognised (mainly in the private
sector) traditional imperfect information concerning quality, unable an informed choice and
might even work in an opposite way as higher prices may be seen as a sign of quality.
Nevertheless, Internet is expected to improve consumers and payers information about
provider quality, prices dispersion and hence stimulate price competition (similar to other
sector Internet purchase influences). Among suppliers this already is a reality with
insurance companies and hospitals reporting major gains, through the engage in e-market
places.
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Plus as geographical coverage increases and physic distances lose their importance,
competition is willing to increase both in local and in international markets.
III.4.1. Potential assessment proposal
While the potential benefits are commonly recognised, down size aspects are also of
concern and can, in the present, endanger the overall benefit of e-health
-
Information misuse. Clear evidences of correct consumer empowerment are still
missing. Access to information doesn’t ensure correct health practices and decisions.
The fact that Internet promotes self-decision, endangers less health skilled consumers
who might engage in inappropriate/bad therapies, increase consumption, or fragile
physician-patient relation.
-
Privacy concerns. Privacy and security concerns will most definitely drive the
development and adoption off high secure technologies for data encryption, storing
and forward, increasing health related costs.
-
Technology.
Technology
usually
represents
huge
initial
investments,
adds
maintenance costs, and also faces the risk of rapidly become obsolete.
-
Staff. In most cases entering an e-health project, enlist in short term, doesn’t mean
cost savings in human resources. On the contrary in most cases new resources must
be allocated to deal with new technological and administrative problems, while
keeping the traditional approach to off-line patients. It was so on hospitals, insurance
companies, and pharmaceutics sales force, among others. Katz and Rice (2000)
pointed the case of Glaxo Wellcome, an international leader pharmaceutical company,
which not only she strongly invested in Internet, but also projected an increase of over
10% in sales representatives, just to remain competitive in traditional channel.
Most of this threatens as well as discussed benefits, both direct and indirect, are
increasingly difficult to quantify or valorise. Adding to this, lack of available data
concerning costs, incomes, consumption variation, etc, increases the difficulty of a
cost/benefits analysis. This problem is presently confronting several decision-makers,
including venture capitals, policy makers and who else might be involved in a go/no go
decision.
Without aiming to propose a cost / benefit analysis tool, but gathering and grouping most
e-health related benefits and risks, a qualitative frame is presented, aiming to identify the
major variables involved in e-health projects.
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SERVICE - ASSESSMENT
EXPENDITURE
EQUITY
S I N Sh
Technology costs
Reduce therapeutic errors
Information misused
Overcome cultural barriers
Decrease intervention lag /
Just-in-time care
Technology obsolesce
Need-for-care
Promote communication
Privacy and Security
Promote informed decisions
Staff increase
Promote prevention
Weaken Physician-patient
relation
Overcome geographic
isolation
Communications
Logistics costs
RISKS
EFFICIENCY
Staff costs
Transaction costs
Overcome Skills
qualification
hospitalisation
Promote 24h access
Therapeutic costs
Others
Promote self-care
Inequity increase
Promote patient autonomy
Malpractice
Social costs
Promote faster triage
Administrative
Promote R&D activity
Weak business model
R&D
Promote competition
Others
Others
Others
Table 14. E-health services, assessment frame.
This model has four areas of influence, with a set of sub-fields, which are described as
follows:
-
Efficiency. This field intends to evaluate the service contribution to improve quality of
care and patient satisfaction, namely by introducing technological advances that
improve productivity or develop competition among health care providers.
-
Equity. This field intends to evaluate the service contribution to improve populations’
access to care, in what concerns “need for care” rather than on income, skills
qualification, and geographical or cultural isolation.
-
Risk. This field intends to evaluate the areas of risk potential associated with the
services or their components.
Information misused
Includes, increasing consumerism, dangerous self therapies and
health practices, later treatment, etc.
Technology
Includes, Equipment accuracy, bandwidth limitations, new standards,
obsolesce
etc.
Privacy & security
Unauthorised access and use of information.
Staff increase
Includes technical and administrative staff, work forces retraining
needs, physicians time, etc
Increase of inequity
Gap among those with internet access and those without,. gap among
those with appropriated web & health skills and those without, etc
Malpractice
Technology failures, incorrect interpretation of information, etc
Weaken
BM based on immature products, unclear revenue sources, etc
business
models
Table 15. E-health related risks.
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-
Expenditure. This field intends to evaluate the service impact on health expense,
namely in what concerns cost savings (S), increased costs (I), new costs (N), and
shifted costs (Sh). Shifted costs refer to cost transfered among health players. Each
sub-fields is described as follows:
Technology
includes equipment, web-site development, hosting and management,
encrypting solutions for secure transactions, etc.
Communications
includes Internet communication, courier expenses, phone, fax, mail,
etc.
Logistics
includes travel expenses, space costs, paper, etc.
Staff
includes medical, administrative, technical staff, in local or remote
facilities. Plus staff time, education/training costs, etc.
Transaction costs
include time to deliver, inventories, value chain markups, etc.
Hospitalisation
includes in-patient care, exams, follow-up, etc.
Therapeutic costs
includes drug costs, therapeutic errors, unnecessary care, etc.
Social costs
un-working period, population welfare, information campaigns, etc.
Administrative costs
health administration and health insurance plans development and
management, regulations, etc.
R&D
drugs research and test, medical procedures and technical innovation,
equipment development, etc.
Others
Marketing, licenses practice insurance, etc.
Table 16. E-health related expenditure.
The assessment of some of the previously described services, according to this frame
lead to major following conclusions, (details in appendices D):
-
Most services present the risk of information misused, staff increase and privacy and
security concerns.
-
Assuming information quality and skilled consumers, most decrease intervention lag,
promote communication, informed decisions and self care.
-
Equity is being developed mainly in what concerns geographic coverage, and time.
Less impact is occurs in “need for care”.
-
There are several costs shifting going on, not only in specific categories like staff or
communications, but among categories like hospitalisation versus technology and
communications. The consumer seams to be wining.
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III.5.
Market Trends
As in other industries, the Internet is delivering vast knowledge and new options to
consumers, raising their expectations and demands. The increasing of out-of-pocket costs
and the explosion of online health information are leading them to assume a much more
proactive role in managing their own health care. With their increased power and
influence, consumers are, demanding new services and more quality. As a consequence,
and taking advantage of technological opportunities, a revolution is undergoing in the
health sector endangering traditional power relations among sector players, as well as
introducing new players, and new products and services, forcing health care companies to
rethink traditional business models.
Many health care organisations have made a start by developing a web site, most times
merely institutional. But supplying information is just a welcome card, which more and
more consumers take for granted, while demanding convenience and customised new
services such as online physician interaction or online management of health plans and
customised disease management programs.
In the fight for online consumers’ loyalty and market opportunities, new entrants (often
highly capitalised and intensively marketed), hospitals and health plans (with advantages
of name recognition and long-standing community relationships) are pursuing strategic
partnerships with Internet giants (like search engines) to gain users and brand
empowerment. Pharmaceutical industry is also investing strongly, exploring new
information and sales channels as well as and improve back office activities, like supply
chain management, procurement, etc.
All sector players seam to be fighting for customers direct access and maintenance.
Nevertheless consumers privacy and credibility concerns, and consequent beavers,
suggest that no present player or service is taking the lead in preferences. Deloitte (2000)
strongly suggests that the apparently weakened physician-to-patient relation, will play a
key role in controlling consumers touch points, benefiting from a traditional trustworthy
relation.
III.5.1. Market development Stage
An indicator of e-health market dynamics is the volume of venture capital flowing into
health related Internet companies. According to Deloitte (2000) between 1998 and 99, the
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number of US venture capital deals involving e-health projects, grew 26%. Despite
expectations, and the continuing high investment from pharmaceutical industry, e-health
market development rate seams to be slowing down.
The wave of bankruptcy that was felt among other sectors dot-com’s has also affected ehealth companies. Major e-health companies and market references, are reporting
substantial financial losses. Among the hardest in 2000:
-
drkoop.com, a three-year-old health content company, reported a net loss of $57.9
million.
-
HealthStream, a provider of Internet-based medical education, reported a net loss of
$5.3 million.
-
iMcKesson, A Internet startup of drug distributor McKesson HBOC, lost $10.1 million.
-
WebMD, which provides online content and transaction support, presented a loss of
$786.9 million
The lack of a clear sustainable value proposition for some dot-com’s is usually pointed as
the reason for these failures. Tieman (2000) suggests that many e-health companies are
more like projects or products masquerade as companies. Cases like drkoop.com with
nearly 1.5 million hits per day in 1999, confirm Slywotzky (1995) vision that, market share
business models no longer stand for success and profit.
Aligned with these visions, some suggest that this is a normal process of market
consolidation and development, no different from what happened with e-companies in
other sectors. The fact that the four pointed cases have different value positioning in ehealth market also confirms the idea of a horizontal wave of market consolidation.
Assessing e-health development stage in US, Lerer (2000), suggests that a less regulated
internal market (namely in what concerns e-commerce, e-prescription, DTC, and privacy),
high connectivity and venture capital, are the reasons to the rapid grow of the e-health
industry in US.
Stuart (2001) supports this position, stating that the absence of public funding for most of
these new services and the risk-averse nature of public institutions represents
opportunities for private sector enterprises, to enter the market capturing patients online.
The highly regulated EU market, particularly in what concerns e-commerce and
information concerns, is also pointed as a barrier for the implementation of some e-health
solutions. Nevertheless Bell (2000), suggest that EU benefit from the existence of National
Health Services and Social insurance, who at local level have the power to influence
market development and direction. An example of this is UK global EMR project (chapter
III). In global terms UK seams to be leading e-health development in EU. UK NHS is
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developing several pilot projects, including a country health network, online prescription
and purchasing solutions, government health libraries, etc.
According to Lerer (2000) the difficulty in finding data about e-health in Europe, at the
present, is leading some EU companies to look for answers in US experience. He defends
that different regulation and sector structures might lead to assumptions based on
incorrect assessments of US reality. As an example, in the US there is a clear need to
connect a diversity of providers and payers for complex transactions, using many different
forms. In this context the claim of huge savings in administrative costs through e-solutions
has some solid bases or justification. In the EU, health transactions are mainly centred on
a NHS or a social health insurance, with few forms and a short number of health players,
and consequently less potential for e-savings.
As so, although US remains a reference in many e-health areas, EU will have to develop
is own e-health environment independently, from US orientations.
III.5.2. Driving Forces
The Internet has already made important developments into the delivery and
administration of health care services, as well as into consumer health information.
Several factors seam to be driving this growth, including consumer Internet experience,
and demand, connectivity, health care market pressures and Internet specific
characteristics (high interaction potential, decreasing cost…). Recognising sector
dynamics, Katz and Rice (2000) stresses major forces influencing health care
development, to which Winter and LeMay (2001) add Genomics:
-
Consumerism. As patients’ awareness grows with Internet information, also their
impatient will grow, with demanding for more, better and fast quality services, as well
as for new forms of co-payment.
-
E-business. Even though health care has been slower than other industries to
embrace the Internet, it is beginning to be pressured by proliferation of related
technologies and business partners, to adopt web-enabled process. Plus consumers’
experience among other sectors (e.g. finance and retail) and technologies (e.g. email), are pushing the market.
-
Wireless technologies. Wireless devices and applications have a huge adoption
potential among health care professionals, as it’s characteristics (portability, small size
and convenience), are highly compatible with user needs in opposite to today’s
centralised and fix workstations.
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-
Genomics. This is one of the most uncertain forces facing, providers, payers and
policy makers, as it might give consumers the ability to know to which diseases they
are most at-risk, shifting health care from cure to prevention.
According to Winter and LeMay (2001), these forces will impact resulting in:
-
Health insurance changes. Online consumers will demand new functionalities, while
developing a deeper understand of industry and prices structures, leading for
personalised health plans and costs reduction (chapter I).
-
Standardisation. The emergence of decentralised web-based solutions, like EMR and
CME applications, are likely to diminish the vast variations inherent in medical care, by
promoting connectivity and physicians common knowledge.
-
Work force retraining. Workforces must adapt to technology and the empowered
consumer. Health care organisations will need to develop different levels of
practitioners’ skills for different patients’ profile.
-
Political reforms. Projected increases in health expenditure (in general), ageing
societies, technology and consumerism will be confronted with limited resources,
resulting in a health organisation’s realignment with the market.
As a consequence of these it can be expected that:
-
Health care organisations that are consumer friendly will be winners.
-
Brand power will increase. Organisations must distinguish themselves through brands,
which will work as anchors to online consumers.
-
Service and speed will be keys to consumer satisfaction.
-
New e-business models and solutions will emerge and challenge Telemedicine
continuity, apart from Internet.
-
The race for capital will hinge on the ability to demonstrate quality, efficiency and
customer focus. Advertising potential revenues will decrease in importance (e.g.
drkoop.com).
-
Health care functional silos (e.g. paper process) must be identified and replaced with
seamless services.
-
Prevention costs will increase.
-
Consumers will want more heath care services and won’t want to pay for them.
-
Ethical dilemmas will accelerate for consumers, providers and purchasers.
-
New opportunities for private health insurers will expand rapidly. A Delloite (2000)
survey states that 25% of e-consumers would be willing to switch health plans to gain
the capability to manage benefits online.
-
Health professionals need to work toward global standards of medical treatment.
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III.5.3. Barriers to Change
Although it seams clear that the same aspects that were of great concern before (security,
privacy, quality, liability, reimbursement, efficiency, equity…) have been transported to ehealth, it is not clear how they will be magnified or minimised, in this new context.
Nevertheless most can be found among health players reactions:
-
Consumers are reluctant to provide personal medical information online, due to a
felling of lack of security and privacy.
-
Information quality is highly questionable and few quality assessment tools do exist.
-
For the less acute there will be a large set of difficulties in using constructively the
power that Internet offers, to make personal health choices.
-
Physicians traditionally complain about patients’ intrusion into their therapies.
Consumer empowerment is increasing even more this conflict, as they confront
physicians with Internet information (often erroneous).
-
Physicians have a traditional reluctance to engage in technology and particularly in
Internet movement. And through their clinical authority, they become fundamental in
the delivery of health care today.
-
Reimbursement for e-health practice, particularly by physicians. Currently, with few
exceptions, e-health practice is not reimbursed by health care insurance plans. Most
physicians take part in e-health activities on a voluntary basis or on a clinical-trial
basis. However, without a satisfactory reimbursement policy, the more wide-spread
adoption of e-health is highly compromised.
-
Changes in health care are a challenging item, for any political agenda and thus
mitigate against substantive reforms. Plus, health entrenched interest groups might
not be aligned with a broader change in health industry, Ganderton and LeMay
(20001).
-
The cost of innovation. Lerer (2000) states that although consumers and physicians
will shape the opportunities in the market, they are not ready, able or even willing to
pay for change.
-
Technology maturity. Internet technology suffers rapid de-valorisation, contrasting with
health care organisations traditional bureaucratic and slow changing process. Katz
and Rice (2000), question if Internet and related health technologies have achieved a
developed stage that justifies investments. Among other concerns they point:
weakness of browser technology, low bandwidth links, search engines limitations, and
physic limitation of wired PC’s.
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Privacy and security
In all sectors information collection through mechanisms such as cookies, profiling, or
clickstreams, raises concerns about privacy and confidentiality. In health care, the initial
concern was for EMR. Nevertheless present concerns go beyond this, as individuals are
now generating a lot of personal health information using health communication tools such
as e-mail, chat, online health risk assessments, etc. A new deeper definition of health
information, and protection to this type of information represents uncharted domain for
public policy.
In this field a US DHHS proposal suggested that health care information should be
disclosed for health purposes, under strictly rules, namely:
-
Security, health information should not be distributed without patient authorisation.
-
Consumer control, patients should be allowed to access and amend their health
records.
-
Accountability, those who improperly handle health information should be criminally
punished.
-
Public interest, individual privacy must not override national priorities of public health,
medical research preventing health care fraud and law enforcement in general.
The cost of innovation
Deloitte (2000) states that one reason keeping physicians off-line is that they already felt
financially squeezed. And adoption of online services adds to their financial burdens in a
number of distinct ways:
-
The up-front and out-of-pocket costs of information system investment
-
Monetary opportunity (time) costs of learning and using a new system.
-
Potential financial risks related to increased professional liability with EMRs and e-mail
-
The financial risk of making an incorrect information system decision and investment.
Therefor finance of the infrastructure, research and pilot projects to implement Internetbased health care is likely to be ensured by governments, private insurance companies
and general industry. Pharmaceutical companies are certainly aware of the potential of
using Internet to develop their relationships with physicians and patients, and are strongly
investing in this area.
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Reimbursement
The lack of reimbursement guidelines limits providers’ interest on online activities. Most
regulations still require that a patient be seen in-person by a physician before the latter
can bill for the services rendered. Although clinically this problem can be overcome quite
easily with solutions such as online videoconference, still most public and private health
funders refuse to reimburse online activities based on quality arguments, sustaining that
e-health cannot be as good as face-to-face care.
Some refute this argument sustaining that the concerns of governments and other thirdparty payers, is not technical quality. Instead it is argued that the real concerns relate to
health care utilisation and cost. The concern is over uncontrolled utilisation, which could
drive up health care spending, particularly for countries where physicians are
predominantly paid on a fee-for-service basis.
Analysing previous Telemedicine experiences, e.g. Teleradiology, both positions seam
defensible. Insurers begin to refuse reimbursement based on the fact that the picture
didn’t have "diagnostic quality". When transmitted images quality grew, debate over
reimbursement shifted to other qualitative dimensions of the doctor–patient relationship.
Nevertheless digitised images are now found almost everywhere in medicine and health
funders commonly reimburse it without question.
It seams clear that, as in Telemedicine, a technology consolidation is also underway in ehealth, which justifies funders’ position. But on the other hand, today’s quality of webbased Teleradiology pictures is equal or greater than those of previous Telemedicine
solutions (one of the reasons way Telemedicine is, in general, migrating to Internet
platforms). So it seams incompressible the refuse to reimbursement those, based on
technology criterions.
This also seams to be some countries positioning (Canada, Norway and some US states)
as they start to reimburse some e-health activities. In this countries the highest barriers
are shifting from technology into other areas, like the justification for a treatment, if the
source of information underling medical decision was Internet based, instead of welldocumented scientific research. This new barrier is closed connected with the quality of
Internet information.
III.5.4. Political implications
Regulations of the offline world are insufficient to regulate online world, special when
online transactions cross national boundaries. The rapid proliferation of technologies and
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services is generating both new and reshaped concerns and policy issues. Rice and Katz
(2000) suggest that the policy issues raised by the use of e-health fall into the following
general areas:
-
Lack of mechanisms to ensure the quality of health information that is being widely
disseminated through electronic media to the public. E-health applications are being
developed according to commercial models in contrast to the previous non-profit
model of health information and education. Even non-profit entities are creating forprofit arms to access the advertising moneys and investment capita that are needed to
developed and operate a competitive web site. Simultaneously many individuals who
do not have medical, public health or social science training are repackaging health
information (some times public available), in the form of commercial health services. A
US DHHS proposed measure, suggest that e-health web sites should: disclosure the
identity of developers and sponsors of the site. The explicit purpose of the site
including commercial purposes and advertising should be mentioned. The original
information sources cited, and confidentiality protection used measures as well as how
the site is evaluated and is content updated should be mentioned. A quality seal, as
happens in other sectors, is some times suggested, but sector is still missing a strong,
credible image in this area.
-
Insufficient evaluations research of to determinate the impact of e-health in health care
utilisation, access, continuity, quality and health status. As more and more activities
migrate to the Internet, the need to evaluate the impact of these activities on
individuals’ health behaviours and quality will require deeper attention.
-
The use of Internet to engage in potentially fraudulent electronic health commerce,
particularly in what concerns drugs prescription. Online drugstores and pharmacies
represent an expanded marketplace for illegal sale of unapproved drugs, prescription
drugs without valid prescription, and products marketed with fraudulent health claims.
-
The development of online health care practice standards and guiding lines,
concerning licensing, liability and reimbursement.
-
Development of integrated national health information infrastructures, to reduce the
inefficiencies, errors and missed opportunities to improve health and well being that
occur because of the lack of complete and correct patients information.
-
The online collection of personal health information and the potential abuses of privacy
and confidentiality.
-
Inequities in access and use of Internet health information. The gap between those
with easy access to the Internet and appropriated technical skills and those without it,
is likely to determinate populations future access to health information, contact with
health care organisations and professionals, receive services at a distance, etc. This is
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a cross sector problem, that has been strongly address in most developed and
developing countries, under a growing number of projects and measures (chapter 1).
Nevertheless, e-health brings with it an added problem which is health literacy, the
capacity to obtain, process and understand basic health information and services
needed to make appropriated health decisions.
-
Correct consumer empowerment. Much of the future planning in e-health is based on
the goal of the empowered consumer who takes greater control and invests more
personal resources in health related consumption. Still, Lerer (2000) suggests that
deeper consumers’ health knowledge must be achieved and evaluate if it is driving to
a more effective and productive use of health resources. The current trend in online
health sites is to emphasise that individuals should use the web at their own risk and
consult their own physicians before they make major decisions. As a result of this
patients might end up visiting their physician more.
-
Cross border markets. Particularly in EU efforts should be conduct to promote the
development of e-health providers dissemination. Although cross-border ambitions
surely exist, most e-health companies are devoted to single countries. Regulation and
medical practice can vary considerably from one country to another, so content
providers must do more than change the language of their web sites. Tricky issues
such as abortion or euthanasia are local sensitive, but also specific diseases can be
treated with different drugs in different countries, highlighting the need to over-come
cultural and legal barriers.
Government interventions in areas such as telecom and pharmac companies regulation,
digital signature recognition, services reimbursement, etc, could have a profound effect in
this process. The industry is in need of standards that address telecommunications policy,
negotiations with telecoms, liability, practice guidelines for health professionals, crossstate/country licensure, and the development of effective curricular guidelines for
integrating e-health into medical and nursing schools and continuing education programs.
Achieving these objectives will require straight relation among e-health programs,
practitioners, and the institutions that support them, toward the ends of effective political
representation, and appropriate research and data gathering upon which to base
legislative and policy initiatives as well as industry-wide standards.
On this context public funding of e-health projects might turn out to be fundamental. One
of the legitimate roles of government is to intervene where markets do not provide for
valued public goods. For the EU, as most health care services are public, governments
intervention in funding demonstration projects and closely monitoring they impact upon
the practice of medicine, it’s a lot more easy that in the US, where this is mainly a private
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sector. Anyway, in bought scenarios projects assessment represent a determinant tool for
future legislative and policy initiatives, as well as more focused, needs-driven research on
which to base policy.
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IV.
CHAPTER IV – DISCUSION AND CONCLUSIONS
Health care is an open entry in most countries policy agenda. Over the years it has
become one of the most largest and dynamic industries, in terms of job creation,
innovation and expenditure. There have been impressive achievements in improving
health quality of populations, life expectancy and universal convergence. There remains
however recurrent concerns regarding the adequacy of resources and the way they are
currently used. The challenges of rapid technological change, growing patient
expectations and ageing populations, reinforced the need for improvement.
Waves of technology incorporation and scientific discovers, have driven the sector from
reliance on direct communication and physician experience, to a higher reliance on
technology and community information. With Telemedecine an important step was taken,
pushing the sector in the direction of more decentralised and patient oriented, care
services. Providers gained access to larger market, patients could obtain local treatment,
advice or other form of care, without expensive and time demanding trips to specialised
centres, etc. New players entered the market and older players had to readjust. Still,
health care was most of all a reactive activity, problem oriented and concerned with
treating disease.
Internet introduction, although expected, has been much slower that among other
industries. Beyond technology concerns and unclear/in-existent legislation, induced
demand concerns as well as third parts financing mechanisms are pointed as reasons for
Internet slow adoption. Nevertheless, this new web-enabled environment has taken health
care from local areas, where Telemedecine left it, literally in to the patient home, and more
recently with the m-Internet, to wherever the patient might be and whenever he need it.
Pushing medicine practice in to a information supported, patient-centred and just-in time
global market activity. Slowly, and sometimes wrongly, the explosion of online health
information promoted consumers’ empowerment, pushing health practice from treatment
to prevention. The growing power of the e-health consumer allow him to overcome
technology pull, and to begin him self to push the market, benefiting from the lobby power
of Internet communities. Still, although growing fast, Internet users remain a part of the all
formed by world health consumers. And their empowerment increases even more the gap
between them and the undeserved, info-excluded population.
With all is particularities (namely in what concerns market structure and legislation) US is
a reference in this field, while EU is trying to catch up, with UK apparently taking the lead.
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This chapter aims to summarise the analysis developed through this work, discussing
some conclusions and suggesting some further research aspects. Two major questions
were established as guiding lines for this research:
-
Does Internet introduction change the business relations among health sector
players?
-
Does new, web-enabled health services, promotes health equity and efficiency, while
reducing health expenditure?
From others sectors reality and health care specificities, it was expected that Internet
would enable information access, improving consumers’ knowledge and leading to better
informed health decisions. This empowerment of the consumer, plus Internet
disintermediation
characteristics,
should
attract
players,
and
increase
market
competitiveness leading to new services, higher efficiency and easier access to care. Also
expected, was that better informed consumers would reduce health expenditure, shifting it
from treatment to prevention.
Concerning Internet impact in business relations, although evidences are clearer in certain
countries than others, changes caused by Internet introduction can be grouped in three
different fields: market structure changes, business models changes, and Technology
changes.
Among most important market structure changes are the entering of new players, the
development of new channels and the consequent changes of power.
-
New players. There are new players entering the market coming from different
economic activities and introducing new competitiveness boundaries for the health
sector (infomediaries, Telecom operators, ISP’s, systems integrators, consulting
companies, search engines, etc).
-
Market diversification. Besides new entrants, traditional players are also diversifying
their business, trying to enter in new economic activities (CME, infomediation,
insurance, contents…). In some cases health services starts to be sold together with
other products like Internet access and computers.
-
New channels. Internet has been a powerful disintermediation and connecting tool in
most sectors, and in the health sector it is doing the same. It’s allowing pharmaceutics
manufactures to step over wholesalers, pharmacies and physicians, directly
dispensing to consumers, and promoting products trough e-DTC marketing. It’s
allowing consumers to step over physicians, accessing online information, advice and
therapies. It’s allowing insurers to step over human agents and employing companies
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by directly access employees online. Simultaneously, it’s also promoting migration
from paper-based activities, to a web-enabled environment that brings closer all
players through less hierarchical collaborative networks and value nets.
-
Consumers’ empowerment is challenging the balance of the patient-physician relation
and exercising lobby pressures over other players.
-
New trading mechanisms like B2C and B2B e-marketplaces, are rapidly developing
bringing closer health players online.
These market changes, the growing number of e-health consumers, as well as the
mirage of high savings and new revenue sources, lead most players to rethink their
business models, according to new demands and Internet environment.
-
Patient-oriented strategies. Aiming to win consumers loyalty companies started to
develop online, patient-oriented strategies, supported in highly personalised/
customisable services (e.g. risk assessment forms, EMR, health plans…) and
expensive marketing initiatives that might include free e-tools (e.g. access, e-mail,
search-engines…) as well as other type of sponsoring activities (e.g. discussion
forums, news lists…).
-
On-demand / just-in-time care. Aligned with consumers autonomy and convenience
expectations, new services (often resulting from vertical joint ventures) are offering
24h availability, with triage and ambulatory services, at home or on the move.
-
Info-mediation. Health sector has always been highly information dependent, but
health information by itself is increasingly becoming an important revenue source.
-
New geographic markets. Companies and providers that used to operate in local /
national
markets,
are
taking
advantage
of
internet
to
consider
international/decentralises opportunities
-
Partnerships and joint ventures. Aiming to gain market share, develop brand power or
entering in new market opportunities, companies are engaging in common projects,
with none traditional players like Internet search engines, ISP’s, etc.
-
New trading tools have been incorporated. E-market places B2B, B2C,
Aligned with these two factors, and although the traditional health business is highly
human dependent, new technological changes are gaining their own space in the new
type of service being offered and so contributing to players competitive advantage.
-
E-prescription and dispensing tools
-
Wireless devices improving patients’ autonomy, while acquiring and processing their
life signs.
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-
WAP / PDA applications for online/real-time access to medical data, sales force
automation tools, etc.
Concerning the second research question, the capacity of web-enabled health services to
promote health equity and efficiency, while reducing health expenditure, a segmentation
of this question is required. Approaching each of the three subjects separately, and even
so, a strictly yes or now answer is not easy, as services change a lot in scope and
influence.
The assessment of equity improvement must be made using different referentials. Internet
naturally increases information gap among those who have access and those who don’t.
This gap is also felt in e-health. Plus, the freedoms of the Internet include the
responsibility for making one’s choices and facing risks, which lead to a second gap
formed by those skilled enough to take advantage of e-health, and those who aren’t. As
discussed, the demographic profile of the e-health consumer population reveals a
population group with economic clout, information sophistication and technological
familiarity. So on this perspective, not only equity isn’t increased, as well as she might
even be decreased.
On the other hand, among those with Internet access, it overcomes geographical and
cultural barriers contributing for the development of common knowledge and
standardisation, while promoting ones access to appropriated care in a decentralised
form. Plus, by promoting competition among players, it can decrease consumers’ costs
and promotes access in a “needed-for-base”. And so promoting equity.
Efficiency gains can also be achieve through e-health, although they are limited by
privacy, liability, reimbursement (among others) concerns:
-
Reduces therapeutically errors. Therapeutic errors are one of the most important
causes of unnecessary expenditure and eventually death. Access to correct patient’s
health information through EMR, increases therapy success. Plus e-prescription
enables the reduction of prescribing errors, dispensing errors, and administration
errors.
-
Reduces intervention lag. By knowing patients medical history, and promoting selfassessment risk tools, earlier detentions and correct guiding can be achieve
contributing for interventions success.
-
Promote informed decisions. Online virtual services allow real-time access to
information, promoting convenience through decentralised access and on-demand
delivery.
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-
As physicians engage the Internet movement, physician-patient relation is enhanced
through online possibility to scheduling appointments, prescription refill, obtaining lab
results, and learning answers to frequently asked questions.
-
Promotes patient autonomy. Risk and symptom assessment tools, and personalised
tracking and monitoring e-care tools, improve patient autonomy, while reducing triage
and intervention lag.
-
To R&D institutions, it enables a much larger target, and low-cost research tools.
Health expenditure among OECD countries is over 8% of GDP. In US this value reached
14% in 1999. The Internet offers the potential for cost reduction and improved productivity
in many health areas, namely:
-
Administrative costs related to insurance billing, medical records and care coordination. Plus staff and offices reduction.
-
Improved trading mechanisms and communication channels, resulting in paper
reduction, faster transaction turnaround, and increased margins by disintermediating
value chain and reaching new partners.
-
Consumer better use of health resources through informed decisions, increasing
prevention and self-care, while reducing unnecessary care, much of which is
insurance-induced overuse.
-
Inappropriate care and “medical error” that result from physician uncertainty about
best practices, or incomplete patients’ records and poor co-ordination.
-
Competition. Hundreds of providers are available at a “click”, improving consumers
knowledge on services prices and quality.
In addition to these, productivity improvements in health care delivery can represent
indirect benefits through better population health, like reducing work-loss, increasing
labour productivity, etc.
Despite these expectations, the adoption of online services represents new expenses
source: technology investment, learning time, liability risks, technical staff allocation, etc:
-
The correct empowerment of the consumer is questionable, highly dependent from
information quality and consumer skills. Further data on the impact of more health
knowledge and more particularly, on the relationship between this knowledge and
subsequent decisions is still missing.
-
Health care providers, have to attend to new market and consumer pressures, while
continuing to meet the needs of traditional consumers. Rather than reducing staff and
offices, they are being forced to hire more personnel to tend to the administrative and
communication needs of an Internet presence.
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-
Reported cost savings of millions of dollars, through players interconnection in the US,
can represent much lower savings in other markets. The US market is highly
fragmented and the connection of all players online, represents lower benefits in
centralised market structures like UK or other EU countries.
In general, some costs are effectively reduced, while others are increased and introduced.
Comparing players benefits and losses, the consumer seams to be winning, through
better access and more efficient use of care services, while reducing his direct expense
on health, but increasing indirect costs like Internet time and technology. Among other
players winning or losing isn’t that simple. Most are being driven by market pressure,
having to adapt to remain competitive. Overall, reduce on health expenditure is not clear,
special due to the miss of cost assessment studies.
Further research
Through this work it was analyse and discuss the health sector market structure, as well
as most important trends, driving forces and barriers. The effect of Internet introduction
was extensively assessed, covering most players, and present services. Still the lack of
available data concerning services and business economic viability, suggests that efforts
should be conducted in this direction. As pointed by different authors, lack of information
is behind the delay of many governmental policies, concerning reimbursement, licensing,
financing, and cross boundaries care, among other subjects who significantly influence
the delivery of care.
Plus, the effect of the genomics in e-health his still very much a doubt. Expectations are
that it will increasingly shift health care to prevention, implying less expensive care. But
effects on consumption are still very dependent on consumers’ correct empowerment.
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Glossary
AOL – America On Line.
ASCII - American Standard Code for Information Interchange.
APS – Applications Service Providers
Bandwidth – Data transfer capacity of a physical connection.
B2B - Business to Business. Commercial transactions between companies over the
Internet.
B2C – Business to Consumer. Commercial transactions between companies and final
customers.
Chat - Internet service that allows multiple users to exchange messages.
Cookie – Archive created in the user hard disk by action of a web program.
CME – Continuous Medical Education.
CRM – Customer Relation Manager.
C2C – Consumer to Consumer. Commercial transactions among consumers.
DHHS – US Department of Health and Human Services
DTC – Direct-To-Consumer Marketing
DSL – Digital Subscriber Lines.
ECJ – Court of Justice of the European Communities
EDI –Electronic Data Interchange.
EMR – Electronic Medical Record.
EU – European Union.
GP - General Practitioner.
HIN - Health Information Networks.
HHC - Home Health Care.
HTML – Hypertext Markup Language.
HTTP – Hypertext Transfer Protocol.
Hyperlink - Text with links to other pages or sites.
ISDN – Integrated Services Digital Network.
ISP – Internet Service Provider..
ITU – International Telecommunication Union.
LSM - Life Signs Monitoring
M-commerce - mobile commerce.
NHS - National Health Service
PACS – Picture Archive and Communicatio Systems. TM equipment.
Portal – Web site where it’s possible to find different links for other sites.
ROI – Return On Investment
SAP – System Application and Products in data processing.
S&F – Store and Forward.
TM – Telemedicine.
URL – Uniform Resource Locator. Standard used for locating sites in the Internet.
WAP – Wireless Application Protocol.
WWW – World Wide Web.
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References
References are alphabetically organised and subject to the following structure:
(Author’s name) – (Editor or other publisher source), (Book name), (Year of
publication);
If the source of information is an online site, it is added the reference “Online available”
followed by the respective Internet address and date of download.
Adamson J, Gall R, McCaughey A, “The issues surrounding Telehealth legislation”, 1998;
Allen A and Stein S, “Cost effectiveness of Telemedicine”, 1999;
Alves J, Campos P Brito P - Livros Centro Atlântico, “O Futuro da Internet e a utilização
do Euro”, 1999;
Bailey J – University of Maryland, “The Retail Sector and the Internet Economy”, 2000;
Barros P, “Eficiência e Qualidade: mitos e contradições”, 1999;
Barros P, “A Economia dos Serviços de Saúde: Sector Publico e Sector Privado na
Prestação”, 2000;
Barros P, “Measuring Hospital Performance”, 2001;
Bauer J and Coile R, “Should Physicians be Paid for Online Care? E-Frontier Challenges
Traditional Reimbursement”, 2000 – Online available: http://www.medicalcrossfire.com/,
July 2001;
Bell N, “The electronification of the
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NHS”,
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-
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available
Béresniak A and Duru G - Climepsi, “Economia da Saúde”, 1999;
Blumberg L, Nichols L, “ Health Insurance Market Reforms”, 1999;
Bovet D and Martha J - John Wiley & Sons Inc, “Value Nets”. 2000;
Bradley N - Aventis, “How e-procurement is changing Aventis’s global purchasing
practices”, 2000 - Online available http://38.144.115.10/pharma/, July 2001;
Buresh A, “Cost Shifting in Health
http://www.health.state.nd.us/, July 2001;
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1999
-
Online
available
Choi S, Winston A and Stahl D - MacMillian Technical Publishing, “The Economics of
Electronic Commerce”, 2000;
Clemons E - University of Pennsylvania, “The Internet and the Future of Financial
Services”, 2000;
Deloitte Research, “The emergence of the e-health consumer”, 2000;
Donovan B, “Health Care Payers: Marching Slowly Toward e-Business”, 2001 - Online
available http://www.skila.com/, July 2001;
Empirica and WRC, “Study on the use of advanced telecommunication services by health
care establishments and possible implications for telecommunications regulatory policy of
the European Union”, 2000;
European Commission, “The social and Labour Market dimension of the Information
Society”, 1997 - Online available http://europa.eu.int/, July 2001;
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Master Dissertation
European Commission, “Commission Communication on the Single Market in
Pharmaceuticals”, 1998 - Online available http://europa.eu.int/, July 2001;
Fisk S, “Telemedicine”, 1999 - Online available http://www.quasar.org/. July 2001.
Forslund D, Gavrilov E and Staab T, “Distributed Telemedicine Using High-performance
Computing Over the Internet”, 1998 - Online available http://www.acl.lanl.gov/
Fox S and Rainie L - Pew Internet & American Life Project, “ The Online Health Care
Revolution: How the Web helps Americans take better care of themselves”, 2000;
Ganderton R and LeMay T - Pricewaterhouse&Coopers, “Overcoming Barriers to Change
in Health Industry”, 2001;
Giraldes M - Editorial Estampa, “Economia da Saúde”, 1997;
Gobis L, “Overview of State Laws and Approaches to Minimise Licensure Barriers”, 1998 Online available http://www.telemedtoday.com/, July 2001;
Harris G, “Telemedicine in Japan”, 1998;
Hudson L - Pharmacia, “E-business and Pharmacogenomics”, 2000 - Online available
http://38.144.115.10/pharma/, July 2001;
Hurst J. and Huges M – OECD publications. “Performance Measurement and
Performance Management in OECD Health Systems”. 2001 - Online available
http://www.oecd.org/, July 2001;
Imai Y, Jacobzone S and Lenain P – OECD publications. “The changing health system in
France”, 2000;
ITU - International Telecommunication Union, “First world Telemedicine Symposium for
developed countries – Final recommendations”, 1997;
Jupiter
Communications,
“Online
http://www.jup.com/, January 2001
Projections”,
1999
-
Online
available
Kee R, Walton R, Harman N, Dransfeld H – Ovum, “Internet and E-commerce”, 2000;
Kienzle M, “The Changing Face of Medical Practice”, 2000 - Online available
http://telemed.medicine.uiowa.edu/. December 2000;
KPMG - Global Communications Industry Group, “Mobile Internet. Any place, any time,
everything”, 2000;
Lerer L - INSEAD, “The healthcare 2020.platform – The E-health Consumer”. 2000;
Lombardi R, “Yesterday’s Business
http://www.pwcglobal.com/, July 2001;
Model”,
1999
–
Online
available
LoyalTech Portugal, “Gestão Multicanal de Clientes”, 2000;
McKnight L - Tufts University – Medford, Massachusetts, “Internet Business Models”,
2000;
Mitchell J, “The Cost Effectiveness of Telemedicine Enhancement by Embracing ehealth”, 1999 - Online available http://www.jma.com.au/, July 2001;
Novais L - Vector XXI / UNICRE, “Os Portugueses e as compras na Net”. 2000;
Nua Ltd, “Surveys”, 1999 - Online available http://www.nua.ie/, June 2001;
OECD publications, “A System of Health Accounts”, 2001;
OECD publications, “Statistics 2001”. 2001 - Online available http://www.oecd.org/, July
2001;
OECD publication, “The Economic and Social Impacts of Electronic Commerce”,1999;
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Oxley H and MacFarlan M – OECD publications, “Health Care Reform – Controlling
Spending and Increasing Efficiency”, 1994;
Palm W, Nickless J, Lewalle H and Coheur A, “Implications of Recent Jurisprudence on
the Co-ordination of the Health-care Protection Systems”, 2000;
Pereira P - Universidad Computense de Madrid, “Price Dynamics with Consumer Search
and Cost Volatility”, 2000;
Pong R and Hogenbirk J, “Reimbursing Physicians for Telehealth Practice: Issues and
Policy Options”, 1999 - Online available http://www.laurentian.ca/cranhr/rep_on.htm, July
2001;
Rice R and Katz J - Sage Publications, “The Internet and Health Communication”, 2000;
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http://www.telemedtoday.com/, July 2001;
Shah C - London Free Press, “Winning Business Models Point the Way for E-Commerce
Start-Ups”, 2000;
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Sinha I – Marketeer, “Internet ameaça preços e marcas”, 2000;
Slywotzky A - Harvard Business School Press, “Value Migration”, 1995;
Slywotzky A, Morrison D, Moser T and Mundt K - Times Business, “Profit Patterns”; 1999;
Slywotzky A and Morrison D - Times Business - “Profit Zone”, 1997;
Stuart N, “E-Delivery of healthcare”, 2001 - Online available http://www.pwcglobal.com/,
July 2001;
The Economist, “E-health”, 2000;
Tieman J, “E-health continues to Short-Circuit”,
http://www.modernhealthcare.com/, July 2001;
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2000
Regulations”,
-
Online
available
2000.
Online
available
Westland J and Clark T - Wesgh, “Global Electronic Commerce”, 2000;
WGTA,
“The
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-
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Appendices
Appendix A: Title: EU countries health sector market structure.
Appendix B: Title: Telemedicine Technology.
Appendix C: Title: E-health services assessment.
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Appendix A: EU, health sector market structures.
UK Health Sector
The UK National Health Service (NHS), is responsible for ensuring health care services to
all citizens in need, supporting is actions trough regional and local authorities.
Health professionals have freedom to chose where to practice (geographically), and in
what terms, private, public or both. To work in the public domain, a contract must be
established with the NHS. Remuneration will depend of contract patters, type of services
and special compensations (e.g. for working in remote areas). General Practitioners (GPs)
will have a client list, with a per capita fee plus a variable per service income.
Patients can chose between private and public services. In the public sector, basic care
will be ensured by a GP in ambulatory care, which will managed is access to secondary
services.
HEALTH CARE OFER
RESOURCES
MANAGEMENT
LOCAL HEALTH
AUTORITY
HOSPITAL
SPECIALISTS
SPECIALISTS
GENERAL
PRACTITIONER
RENT
RESOURCES
STATE
(NHS)
REGIONAL
HEALTH
AUTORITY
AMBULATORY
CARE
PHARMACY
GENERAL
PRACTITIONER
PRIVET SECTOR
Lists inscription
Wages Deduction
SOLIDARITY
FUND
PUBLIC SECTOR
Freedom of choice
POPULATION & COMPANIES
PRIVET INSURANCE
COMPANIES
Figure 35. UK health sector. Source: Béresniak and Duru (1999).
In the private sector a patient can directly access specialists consultation, exams, etc.
Pharmaceutical services and medicaments are kept private.
Public care financing will be majority ensured by tax collection, proportionally to citizen
incomes. Social security, solidarity funds, or moderation fees will support the remaining
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values. When using public services, the patient will be free of charges, except for specific
medicaments, dentistry treatments and GP specific services (e.g. vaccination). To benefit
from this exemption, patient must be inscribed in a GP’s list. GP with more than 5.000
clients list (fundholders), will manage a state grant budget, for acquiring patient secondary
services like specialists consultations, exams, hospitalisations, treatments, etc, and will
directly negotiate services with providers. The subscriber will directly pay private sector
services, with eventual reimbursement. Both private and public prices are regulated by the
state.
Between 1991 and 1995 the NHS hospitals were transformed in autonomy institutions
with ability to established services prices, working conditions and hiring employees. Their
incomes are control by the Heath Ministry, to who they must give 6% of their revenues. It
was expected that the local competition environment would lead to costs reduction.
French Health Sector
The French system can be characterised as a mixed system combining elements of
private and public care (Imai et al, 2000). State is responsible for regulate health sectors
activity. He annually defines the amount of financing to be given to the Social Security,
which is the state agency responsible for negotiate and establish health conventions with
professional’s syndicates.
There are public and private institutions and hospitals. Health professionals, particular
physicians are free to choose where to work (geographically), and in public or private
sector.
Patient have freedom of choice in selecting health services providers, will it be GPs,
specialists, public or private. And he can access it as much as they wont.
The finance of the health system is supported in majority by Social Security. Social
security incomes are based on state subventions (10%) insured companies and
population quotes. Sickness insurance is one of social security fields (others includes
family and oldness programmes). The sickness insurance is segmented by socioprofessional categories (MSA – Agriculture Social Mutuality, CNAMTS – dependent
workers…). Every worker and families has access to a health care program, and each as
is own specific offers.
If a patient chooses a public institution, only as to pay a moderation tax. He pays directly
to the health care provider, and is reimbursement based on the convention values. When
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Fees
COMPANIES
SOCIAL SECURITY
FAMALY
Taxes
Subvention
STATE
Taxes
Fees
SICKNESS INSURENCE
CNAMTS
MSA
ARTISAN
EMPLOYES
Payment
SUPPLY
Access
Free
HOSPITAL
Payment
MUTUALITY
Reimbursement
PRIVET
INSURANCE
HOSPITAL
- LUCRATIVE
- NON
LUCRATIVE
Prize
...
MINAS
Reimbursement
POPULATION
OLDNESS
- PUBLIC
SPECIALIST
SPECIALIST
PHARMACISTS
G. PRACTITIONER
G. PRACTITIONER
PRIVET SECTOR
PUBLIC SECTOR
Figure 36. France health sector. Source: Béresniak and Duru (1999).
choosing private providers, if a convention doesn’t exist, he has to support the total value
of the service. Prescribed medicaments, if considered in social security list, also benefit
from price deduction. The patient only pays a percentage and the pharmaceutics will later
be reimbursed for the difference.
Physicians have the possibility to joint a convention established between professional’s
syndicates and the Social Security sickness insurance. These conventions define medical
intervention fees. Those who do not which to join the conventions can freely define their
fees.
Private hospitals and institutions with non-lucrative purposes have an annual global
budget. Private institutions are reworded by moderation fees and daily income.
Medicament commercialisation is controlled by the state, with regulated prices, margins
and distribution criteria’s. Dispensary also requires state authorisation.
Denmark Health Sector
Denmark is divided in 16 provinces, with regional governments. Each of this is responsible
for local population’s health, financed by charged taxes. Every citizen has the right to
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health care assistance without having to pay to health professionals. To minimise potential
differences caused by demographic or economical development, it is made a
redistribution of tax incomes, between provinces.
The public sector health system is highly developed, each region as is one hospitals, GPs,
specialists, etc. Physicians are free to choose between private and public activity or both.
Health professionals, particularly physicians, usually work in the public sector, and are
paid in a per capita retribution base.
POPULATION
FREEDOM OF CHOICE:
GROUP 1:
- Full cover;
- Lists inscription;
- General practitioner;
GROUP 2:
- Copayment of expenses;
- Free access
GROUP 1
GROUP 2
95% of
Population
5% of
Population
GENERAL PRACTITIONER
SPECIALISTS
DENTISTRY
PRIVET OFFER
HOSPITALS
SPECIALISTS
GENERAL PRACTITIONER
PHARMACISTS
DEMEND
PUBLIC OFFER
PROVINCE
MANAGING DEPARTMENT
ONE PROVINCE
PROVINCE
INCOME
RE-DISTRIBUTION
PRIVET INSURANCE
COMPANIES
Figure 37. Denmark health sector. Source: Béresniak and Duru (1999).
Patients can choose between two public models. In model 1 (95% of population), health
care is fully gratuity, except for some medicaments and dental care, and in this case they
must belong to a GP’s list. This GP is responsible to managed their access to other health
care providers. No direct access to specialists is allowed, and they must use local
hospitals. If for some reason (e.g. emergency, or expertise), a different hospital is
consulted, an accounts settle between hospitals will be made.
Patients also have the opportunity to choose a different model of public service. Model 2
(5% of population), implies partial finance of health care, but allows the opportunity to
directly access any health provider.
Medicament price as well as health care providers’ revenues are established by the state.
Private health insurance companies, although allowed have a small presence, limited to
uncovered expenses.
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Swedish Health Sector
Swedish health system is decentralised at management level as well as mostly in financial
terms. Swedish is divided in seven health regions with, each having three provinces, with
enlist one central hospital having a medical school and full health professionals. Central
government ensures health goals, and medical education, while provinces are responsible
for paramedic formation and partial institutions financing.
Health is considered to be a public matter, and private initiative is very restricted. Most
health professionals (90% in 1994) worked in the public sector, although no concrete
measures as been adopted against private sector.
Each province has is one health professionals and hospitals. Basic care is managed
locally, except in special cases.
STATE
PROVINCE
...
PUBLIC SECTOR
HOSPITALS
PROVINCE
PROVINCE
HEALTH CENTERS
Privet sector
Reimbursement
POPULATION
PRIVET SECTOR
Figure 38. Swedish health sector. Source: Béresniak and Duru (1999).
Health financing is in majority ensured by state and province tax collection, and
complemented by workers quotes and a percentage from the value paid by the patient
when buying medicaments or consultations. All price values are regulated by the state.
A plan is in course to introduce competition among health care providers, in the public
sector, at resemblance to what is done with GP fundholders in the UK.
Portuguese Health Sector
Portuguese state ensures health care services to all citizens in need, supporting is actions
trough the National Health System, regional and local authorities.
Health professionals have freedom to chose where to practice (geographically), and in
what terms, private, public or both. To work in the public domain, a contract must be
established with the NHS. Remuneration will depend of contract patters.
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Patients can chose between private and public services. In the public sector, basic care
will be ensured by a family doctor (excluding emergencies). Who will manage is access to
secondary services.
HEALTH CARE OFER
Price Negotiation
STATE
(NHS)
Budget
HOSPITAL
Emergency
CLINICS
SPECIALISTS
SPECIALISTS
Taxes
GENERAL
PRACTITIONER
PHARMACY
GENERAL
PRACTITIONER
Lists inscription
PRIVET SECTOR
PUBLIC SECTOR
Freedom of choice
POPULATION
PRIVET INSURANCE
COMPANIES
SUB-SYSTEMS
Figure 39. Portuguese health sector. Source: Béresniak and Duru (1999).
When using public services, the patient will usually support a moderation fee. Exemption
is usually associated to special social conditions or illness.
Public care financing will be majority ensured by tax collection, proportionally to citizen
incomes. Health institutions receive a specific budget and solidarity fund, private health
plans or moderation fees will support the remaining values.
The private sector assumes a complementary role. Pharmaceutical services and
medicaments are kept private. As well as some specific specialities like, dentistry
treatments. In the private sector a patient can directly access specialists consultation,
exams, etc. Private sector physicians are rewarded by patients’ out-of-pocket payments,
which might or not be reimbursed.
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EU financing models and sources of funding:
In most countries health care financing mechanisms are becoming increasingly complex
with a wide range of institutions involved. Empirica and WRC suggests an outline
description of financing models and sources of funding for EU member sates:
OVERALL MODEL
B
Compulsory health insurance for all major risks
DK
National Health services mainly funded from
general taxes
Numerous insurance funds and a significant
private sector
Compulsory health insurance, national health
service and a significant private sector
Embryonic national health service; mix of
general taxation and compulsory insurance.
Compulsory health insurance cover almost all
the population
National health service and some co-payment
insurance
National health service based on compulsory
health insurance
Compulsory health insurance
D
EL
E
F
IRL
I
L
NL
A
P
FIN
SW
UK
Complex system of public and private insurance
but moving to a national scheme
Mandatory comprehensive health insurance
National health service based on compulsory
health insurance
National health service with a shift of decision
making from state to local level
A comprehensive public sector health systems
with strong local control
National health services mainly funded from
taxation
FUNDING
Compulsory health insurance with significant
state subsidy
85% from general taxation with the
remainder from co-payments
Complex mixture of sources but only 21%
from general taxation
Private sector is substantial high
Dominated by general taxation with some
compulsory insurance.
Mostly statutory sickness funds but some
direct payments
Mainly general taxation with a small
proportion from insurance
Mix of general taxation and compulsory
contributions
Mostly from sickness funds with 27% from
state subsidies
Mostly from compulsory insurance schemes
with some voluntary or private
Health insurance scheme is dominant model
but there are also substantial private
insurance contributions
Main funding from national insurance
schemes with small private sector as well
Almost even balance between state and local
taxation with some national insurance and
some private payments
Mainly local taxation supplemented by state
funds and national insurance
Mainly general taxation with a small private
sector
Table 17. Financing Models in EU countries. Source: Empirica and WRC (2000).
It can be seen that social insurance, private insurance and out-of-pocket co-payments by
patients are involved in varying mixes in the different countries. Overall, four main clusters
of countries financing models can be defined:
Finland, Greece, Ireland,
Italy, Spain, UK
Denmark, Portugal
Austria, Belgium, France,
Germany, Luxembourg
Netherlands
Predominant system of
finance
Public: Taxation
Public: Taxation
Public:
Compulsory
social
insurance
Mixed compulsory and private
voluntary insurance
Main supplementary system of
finance
Private voluntary insurance, direct
payments
Direct Payments
Private voluntary insurance, direct
payments, public taxation
Public taxation, direct payments
Table 18. Financing Models in EU countries. Source: Empirica and WRC (2000)
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Empirica and WRC (2000), points that although consumers pay indirectly for health care
trough their contribution to tax revenue and/ or their payment of insurance premiums, in all
countries they also have some level of direct expenditure on health care as well.
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Appendix B: Telemedicine Technology.
Telemedicine is not a specific technology but a mean for providing health services at a
distance using telecommunications and medical computer science. Although not a
technology it is highly equipment dependent as traditional “hands-on” physical care is
replaced by technological expertise, visual contact and data evaluation. Consequently
relationships became highly dependent from quality and reliability of equipment. As an
example, for Teleconsulting services, most systems are based in digital image/signals
acquisition, store and forward. Common specifications for these systems considered
sound fidelity, image resolution, range of motion depicted, transmission speed,
information security, etc. Bandwidth is a horizontal concern. The greater bandwidth
produces higher costs but provides greater capacity for real-time images, video, and
higher quality resolution. Colour quality and time frames speed are determinant to identify
and evaluate movements and reactions.
Kienzle (2000) suggests a three level segmentation for Telemedicine used technology:
basic hardware, peripheral equipment and telecommunications platforms.
-
Basic hardware covers traditional full disseminated equipment, like telephones, PC’s,
desktop systems (e.g. cameras and teleconferencing software), room size systems,
etc.
-
Peripheral equipment includes, digital cameras, data collection devices (e.g. glucose
monitors), sound devices (e.g. digital stethoscopes), radiologic devices, wireless and
handheld devices, etc.
-
Telecommunications
platforms.
Synchronous,
asynchronous,
satellite,
cable,
wireless, etc
Focusing in telecommunications platforms as the differentiation factor from traditional
health technologies, and consequently neglecting eventual specific developments to
customise peripheral equipment and basic hardware to Telemedicine needs, it’s possible
to differentiate from asynchronous (e.g. store and forward), and synchronous solutions
(e.g. real time diagnoses), used infrastructure platforms (circuit switching, packet switch,
point-to-point, point-multipoin), fix and wireless technologies, etc.
At the infrastructure level no specific changes are recognise among telecommunication
solutions used in Telemedicine, from others used in different sectors. On the other hand,
transmission protocols obey to specific norms to assure system compatibility and
robustness. As the computer industry standards for hardware and software have been
created, such as IEEE, so that components of different vendors and systems are
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compatible, so are medical specific standards needed to facilitate Telemedicine solutions.
Fisk (1997), points a sample of the major health care standards utilised in Telemedicine:
-
HL7 - Standard for sharing clinical data written by Health Level Seven committee
-
E1381/1394 - Standard for exchanging lab data among computers and instruments
written by ASTM E31.14 subcommittee
-
P1073 -Medical Interface Bus standard written by IEEE P1073 committee.
-
E1460 - Standard for sharing Modular Health Knowledge Bases Written by ASTM
E31.15 subcommittee
-
DICOM - Image exchange standard written by American College of Radiology and
National Electrical Manufacturer's Association.
-
E1467 - Standard for exchanging neurophysicological data written by ASTM E31.16
subcommittee
-
NCPDP - Pharmaceutical information exchange standard written By National Council
of Prescription Drug Pharmacies
-
X12N - Insurance data exchange standard written by Insurance Subcommittee of
Accredited Standards Committee X12.
The type of solution used depends on the type of applications a particular Telemedicine
service intends to provide. Applications like store & forward only need a standard
telephone line to be considered a “robust” network; while teleradiology applications
require high bandwidth networks. Different from what happens with Internet, Telemedicine
technologies are still far from being a commodity. Although most are commonly used and
accepted, they have a very limited application scope, related with medical specialisation
areas.
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Appendix C: E-health services assessment.
The following charts present the results of the application of “service assessment” model
(Chapter III), to some e-health services.
Online Support groups
SUPPORT GROUPS - ASSESSMENT
EXPENDITURE
S
EQUITY
I N Sh
Technology costs
Overcome geographic
isolation
Communications
Overcome cultural barriers
Logistics costs
Need-for-care
Staff costs
Transaction costs
Overcome Skills
qualification
hospitalisation
Promote 24h access
Therapeutic costs
EFFICIENCY
RISKS
Reduce therapeutic errors
Information misused
Decrease intervention lag /
Just-in-time care
Technology obsolesce
Promote communication
Privacy and Security
Promote informed decisions
Staff increase
Promote prevention
Weaken Physician-patient
relation
Promote self-care
Inequity increase
Promote patient autonomy
Others
Malpractice
Social costs
Promote faster triage
Administrative
Promote R&D activity
Weak business model
R&D
Promote competition
Others
Others
Others
Table 19. Support Groups.
Online CME
ONLINE CME - ASSESSMENT
EXPENDITURE
S
Technology costs
Communications
Logistics costs
EQUITY
I N Sh
Overcome geographic
isolation
Overcome cultural barriers
Need-for-care
Staff costs
Transaction costs
Overcome Skills
qualification
hospitalisation
Promote 24h access
Therapeutic costs
Others
RISKS
EFFICIENCY
Reduce therapeutic errors
Information misused
Decrease intervention lag /
Just-in-time care
Technology obsolesce
Promote communication
Privacy and Security
Promote informed decisions
Staff increase
Promote prevention
Weaken Physician-patient
relation
Promote self-care
Inequity increase
Promote patient autonomy
Malpractice
Social costs
Promote faster triage
Administrative
Promote R&D activity
Weak business model
R&D
Promote competition
Others
Others
Others
- Course quality and
recognition
Table 20. Online CME.
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Contact Centres
CONTACT CENTRES - ASSESSMENT
EXPENDITURE
S
EQUITY
EFFICIENCY
I N Sh
Technology costs
Overcome geographic
isolation
Communications
Overcome cultural barriers
Logistics costs
Need-for-care
Staff costs
Transaction costs
Overcome Skills
qualification
hospitalisation
Promote 24h access
Therapeutic costs
Others
RISKS
Reduce therapeutic errors
Information misused
Decrease intervention lag /
Just-in-time care
Technology obsolesce
Promote communication
Privacy and Security
Promote informed decisions
Staff increase
Promote prevention
Weaken Physician-patient
relation
Promote self-care
Inequity increase
Promote patient autonomy
Malpractice
Social costs
Promote faster triage
Administrative
Promote R&D activity
Weak business model
R&D
Promote competition
Others
Others
Others
Table 21. Contact Centres.
EMR
EMR - ASSESSMENT
EXPENDITURE
S
Technology costs
Communications
Logistics costs
EQUITY
I N Sh
Overcome geographic
isolation
Overcome cultural barriers
Need-for-care
Staff costs
Transaction costs
Overcome Skills
qualification
hospitalisation
Promote 24h access
Therapeutic costs
Others
EFFICIENCY
RISKS
Reduce therapeutic errors
Information misused
Decrease intervention lag /
Just-in-time care
Technology obsolesce
Promote communication
Privacy and Security
Promote informed decisions
Staff increase
Promote prevention
Weaken Physician-patient
relation
Promote self-care
Inequity increase
Promote patient autonomy
Malpractice
Social costs
Promote faster triage
Administrative
Promote R&D activity
Weak business model
R&D
Promote competition
Others
Others
Others
Table 22. EMR.
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E-procurement
E-PROCUREMENT - ASSESSMENT
EXPENDITURE
S
EQUITY
I N Sh
Technology costs
Overcome geographic
isolation
Communications
Overcome cultural barriers
Logistics costs
Need-for-care
Staff costs
Transaction costs
Overcome Skills
qualification
hospitalisation
Promote 24h access
Therapeutic costs
Others
EFFICIENCY
RISKS
Reduce therapeutic errors
Information misused
Decrease intervention lag /
Just-in-time care
Technology obsolesce
Promote communication
Privacy and Security
Promote informed decisions
Staff increase
Promote prevention
Weaken Physician-patient
relation
Promote self-care
Inequity increase
Promote patient autonomy
Malpractice
Social costs
Promote faster triage
Administrative
Promote R&D activity
Weak business model
R&D
Promote competition
Others
Others
Others
Table 23. E-procurement.
Risk assessment tolls
RISK ASSESSEMENT TOLLS - ASSESSMENT
EXPENDITURE
S
Technology costs
Communications
Logistics costs
EQUITY
I N Sh
Overcome geographic
isolation
Overcome cultural barriers
Need-for-care
Staff costs
Transaction costs
Overcome Skills
qualification
hospitalisation
Promote 24h access
Therapeutic costs
Others
EFFICIENCY
RISKS
Reduce therapeutic errors
Information misused
Decrease intervention lag /
Just-in-time care
Technology obsolesce
Promote communication
Privacy and Security
Promote informed decisions
Staff increase
Promote prevention
Weaken Physician-patient
relation
Promote self-care
Inequity increase
Promote patient autonomy
Malpractice
Social costs
Promote faster triage
Administrative
Promote R&D activity
Weak business model
R&D
Promote competition
Others
Others
Others
Table 24. Risk assessment tolls.
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Appendix D: Portuguese E-health Experiences.
Portuguese health sector introduced Telemedecine first projects during the 1980’s,
although only during the 1990’s it achieved relevance. Presently several projects are in
course, involving remote consulting, collaborative networks (INEM, IPS…), EMR, remote
monitoring of chronic patients, and so on. The changes, drivers and barriers, although
having specific aspects, in general were no different from the ones felt in countries with
similar market structure.
In the last years Internet entered the health sector. Not through Telemedecine previous
users, most of which where public institutions usually in joint projects with PT telecom
operator, but through private institutions and new entrants from technological areas. At
this time the trend remains, suggesting that the market still in a technology driven stage,
behind the consumer push, felt in US. Most important projects in course are in the field of
health portals and B2B e-marketplaces, confirming market delay:
-
Health portals. Vidasaudavel is a health portal introduced last April by a telecom
operator (OniWeb). It represents an investment over 1 million dollars, and
expectations are for break-even in three years. It offers an health encyclopædia,
drugs and therapies advice, risk assessment tools, and e-commerce services in
(B2C), although expectations are that it will developed a B2B e-marketplace soon.
Pointed revenue sources range from publicity, e-comerce, and payed health
information services. Other e-health portals with simillar positionings are Saudeglobal
and Cidade Médica virtual. Cidade Médica Virtual, was one of the firsts portugueses
health sites. It started in 1995 ofering spread health information. In May 2000, a
Private health provider (Grupo José de Melo), bought it, in the contex of their
expansion strategy, and developed it to is present form.
Figure 40. Saudeglobal, Portuguese health portal.
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Master Dissertation
-
E-Health marketplaces. SaudeB2B, is a vertical e-marketplace, target to hospitals and
clinics suppliers. It belongs to a technological company, HLCNet, who also developed
similar market places for other activity sectors. HLCNet receives 2% of every
transaction.
-
Online CME. The Universidade Catolica, is developing a online, six years course,
aiming to create a new type of general physician, who will be able to assess patients
situations and guide them through different possibilities of the health specialities and
services.
An ambitious project conceived by INFARMED and GE Capital (a IT company), is now
entering the pilot phase. It’s a wireless system, allowing physicians to remotely access
patients records, and drugs information, as well as risk assessment tools. This project
involves 50 physicians from the public sector, and has the particularity to target an area of
customers (home patients), who as been traditionally dominated by the private sector.
Nevertheless the project has very grey areas, due to the in-existence of a legal frame for
this practice.
Several other projects (most resulting from Telemedicine migration to the Web
environment) are undergoing. Still, in-existence of a clear legal environment, lack of ehealth documentation and even less data concerning quantifiable variables (e.g. number
of user, costs or incomes), difficult a clear orientation among sector players.
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