Using an investment model to build a foundation for program success

1. Perspective Chris Bartlett
Klaus Boehncke
Vanessa Wallace
Andrew Johnstone-Burt
Optimising
E-Health Value
Using an Investment
Model to Build a
Foundation for
Program Success

2. Contact Information
Beirut Düsseldorf Milan Sydney
Ramez Shehadi Michael Ruhl Pietro Candela Vanessa Wallace
Partner Partner Partner Partner
+961-1-985-655 +49-211-3890-183 +390-2-72-50-91 +61-2-9321-1906
ramez.shehadi@booz.com michael.ruhl@booz.com pietro.candela@booz.com vanessa.wallace@booz.com
Jad Bitar Frankfurt New York Klaus Boehncke
Principal Rainer Bernnat David G. Knott Principal
+961-1-985-655 Partner Senior Partner +61-2-9321-2813
jad.bitar@booz.com +49-69-97167-0 +1-212-551-6541 klaus.boehncke@booz.com
rainer.bernnat@booz.com david.knott@booz.com
Walid Tohme Chris Bartlett
Principal Hong Kong Gil Irwin Senior Associate
+961-1-985-655 Ting Zhao Partner +61-2-9321-2839
walid.tohme@booz.com Principal +1-212-551-6548 chris.bartlett@booz.com
+86-21-2327-9800 gil.irwin@booz.com
Berlin ting.zhao@booz.com Tokyo
Marcus Bauer San Francisco Paul Duerloo
Partner London Dr. Sanjay Saxena Partner
+49-30-88705-834 Andrew Johnstone-Burt Principal +81-3-6757-8615
marcus.bauer@booz.com Partner +1-415-263-3729 paul.duerloo@booz.com
+44-20-7393-3216 sanjay.saxena@booz.com
Delhi andrew.johnstone-burt@booz.
Suvojoy Sengupta com São Paulo
Partner Ivan De Souza
+44-20-7393-3314 Senior Partner
suvojoy.sengupta@booz.com +55-11-5501-6368
ivan.desouza@booz.com
Phillip Davies (professor of health systems and policy, University of Queensland School of Population Health), Tommy Lim, Liang Ma,
Jason Kang, Dr. Christian Rebhan, Dr. Martin Siess, Alfred Sivathondan, and Charles Wong also contributed to this Perspective.
We would also like to acknowledge the significant contributions by Sebastian Schneeweiss, associate professor in the Department of
Epidemiology, Harvard Medical School, to the medical modelling in our e-health investment analysis tool.
Booz & Company

3. EXECUTIVE Electronic health (e-health) initiatives that apply information
technology to the delivery of healthcare services for patients
SUMMARY
and management of clinical information are an essential
weapon in the battle against the rising costs and other sys-
temic problems in healthcare. For all their promise, however,
the introduction of such initiatives has been a slow and ardu-
ous process in many healthcare systems.
Large e-health programs are often policymakers as they seek to define,
severely hampered by ill-defined user implement, and gain acceptance of
requirements, low levels of stakeholder viable e-health programs. Such a
engagement, slow solution adoption model must yield a multidimensional
rates among providers, and an business case that accurately calculates
unwillingness to invest the often large and compares the different types of
amounts of capital required. When benefits that can be achieved, the value
e-health programs have successfully of various e-health applications, the
moved into their development and stakeholder groups that will incur
implementation phases, they often related costs, and the stakeholder
encounter massive cost overruns and groups to which the benefits will
schedule delays. accrue. This then allows transparent
engagement with stakeholders,
These problems often cause e-health appropriate design of incentive
initiatives to bog down and fail, structures, and a program focus on
but they can be overcome. The those components with the potential
solution begins with a customisable to rapidly deliver benefits.
investment model that can help guide
Booz & Company 1

4. HIGHLIGHTS
• Developing a business case for
any major reform of a complex
networked system such as
healthcare requires a holistic
approach to determining the costs
and benefits derived by multiple
stakeholders.
• Investment in comprehensive
e-health programs can lead to
substantial savings in annual
national healthcare expenditures
(in the case of Australia, this
will equate to a conservatively
estimated AU$7.6 billion in 2020
alone, representing 3 percent
of the nation’s total healthcare WHY E-HEALTH • The fragmented nature of the health
systems in many countries and their
expenditures, given current trends).
These numbers only reflect direct INITIATIVES FAIL lack of centralised management and
savings in healthcare expenditures leadership
and do not include economic
flow-on effects, which can also be To overcome these barriers and
substantial. achieve a successful implementation
The healthcare industry lags and acceptance of e-health initiatives,
• The largest type of benefit from behind other information-intensive each of the major stakeholder groups
e-health is the reduction of adverse industries, such as financial services, in a system must agree that the ben-
drug events caused by the lack telecommunications, and now many efits of the project will exceed its costs.
of access to pertinent patient government agencies, in the use of But this presents a problem too. Costs
information at the point of care. information technology. There are and benefits are often misaligned
several reasons: in healthcare: Stakeholders that are
• Of the core e-health applications
required to invest significant resources
and capabilities, the one with the
• Reluctance of healthcare providers in e-health may only reap a smaller
greatest benefits is medication
to adopt technology or change their portion of apparent benefits, and
management. Other capabilities,
clinical practices without what they those with the most to gain may incur
such as quality and performance
consider to be a compelling medical fewer costs. For example, the majority
management and electronic
reason of the benefits from e-health typically
medical records (EMRs), offer
accrue to the stakeholders that pay for
significant but secondary benefits.
• The absence of an agreed-upon set healthcare services, but many of the
• The implementation of e-health of performance targets that can be financial and nonfinancial costs are
capabilities in primary care drives accomplished through the use of IT inevitably incurred by the providers.
the majority of systemic benefits. in healthcare
However, these benefits are not Governments are best positioned to
realised in the primary care setting • The perceived opportunity costs of intervene in this distorted market and
itself but flow on to acute settings IT investments in healthcare—too better align costs and benefits. But
through the avoidance of hospital often, a dollar spent on IT is seen as that requires that policymakers, and
visits. a dollar that has been diverted from those who seek to influence them, fully
delivering services directly to the understand the e-health programs they
• E-health is an essential factor in
patients are considering. This understanding is
modern healthcare reform. It has
often limited for a variety of reasons:
the potential to reduce the overall
pressure on patients, providers,
and payers; enable quality and
performance measurement; and
enhance capabilities.
2 Booz & Company

5. • The business cases for e-health • The quantification of benefits does In our work on the strategy and
programs tend to be skewed by not include the ripple effects that an implementation of healthcare IT initia-
taking the sole perspective of the investment in one care setting can tives in various countries, including
stakeholder making the largest have in other areas of the system. the United States, Canada, Germany,
investment. Italy, UAE, China, and Singapore,
• Business cases often take a narrow it has become clear that bolstering
• The evidence needed to get clini- focus on a single application. For the success rate of e-health programs
cians to support the program and instance, an electronic medical depends on the development of robust
adopt the proposed technology is record (EMR) application may business cases and benefits realisation
not compelling and sometimes is be proposed without considering scenarios. These must measure and
even completely omitted from the the full spectrum of application or compare the value of applications,
business case. capability options that could be as well as identify major stakehold-
prioritised to address the problem. ers and the distribution of costs and
benefits among them.
Costs and benefits are often
misaligned in healthcare: Stakeholders
that are required to invest significant
resources in e-health may only reap a
smaller portion of apparent benefits,
and those with the most to gain may
incur fewer costs.
Booz & Company 3

6. THE NEED FOR and refining it in eight major e-health
initiatives in Europe, the Americas, the
makers to estimate benefits and
costs as accurately as possible. In the
AN E-HEALTH Middle East, and Southeast Asia over Booz & Company model, the method-
INVESTMENT the past decade. These experiences
reveal that it is essential to construct
ology for estimating benefits is under-
pinned by a high-level scan of more
MODEL e-health business cases using a holistic than 2,000 academic research papers
approach that encompasses four key and a detailed analysis of more than
dimensions (see Exhibit 1). 400 academic studies. On the cost
side, the benchmarks used are based
The most effective means for build- Using a holistic, multidimensional on actual costs of existing e-health
ing a business case that can help approach to considering e-health programs and then adjusted for
policymakers navigate through the programs enables decision makers anticipated adoption rates and imple-
complexities of e-health initiatives is to create a fact base that includes mentation schedules. In both cases,
a rigorous investment and benefits costs and benefits, the stakeholders the research and evidence on which
realisation model. The power of such to whom they will accrue, the specific the assumptions are based are refined
an e-health investment model extends applications that drive them, and and updated as new findings emerge.
beyond the clear understanding of the the implementation time frames they Finally, the model and its inputs are
application options, costs, and benefits require. Decision makers can draw validated by a team of distinguished
of a program. It also increases imple- on this fact base to construct alterna- international e-health experts, medical
mentation success rates by creating a tive e-health strategies that feature doctors, and academics.
foundation for developing effective different combinations of options in
incentive frameworks and change each dimension. Thus, the investment The power of such an investment
management plans, as well as enhanc- model is an essential tool for plan- model in e-health programs (as well
ing accountability by enabling the ning the scope of an optimal e-health as the value that can be derived from
ongoing monitoring and measurement program and setting its priorities. successful e-health programs) can be
of the projected benefits. demonstrated by applying it to the
In addition to managing multiple Australian healthcare system (see
Booz & Company has developed an dimensions, an effective e-health “Customising the E-Health Investment
e-health investment model, testing investment model must enable policy- Model for Australia”).
Exhibit 1
Four Dimensions of E-Health Financial Model Framework
Stakeholder Dimension Application Dimension
- Enables identification of “winners” and - Enables ROI calculation based on
“losers” from e-health capabilities application/infrastructure component
- Identifies and quantifies the incentives - Allows prioritisation of e-health capabilities
needed for adoption for implementation planning
- Examples: GPs, polyclinics, public - Examples: Electronic medical records,
hospitals, private hospitals, specialist personal health records, medication
centres, long-term care management, decision support
Financial
Model
Framework
Cost-Benefit Category Time Frame
- Enables logical grouping of costs/ - Identifies when costs and benefits will
benefits for marketing/communication accrue based on implementation road map
purposes - Factors in the complexity and effort to
- Identifies impacts on national health deploy applications/components and their
outcomes and performance metrics adoption/take-up by stakeholders
- Examples: Quality, reduced errors, productivity - Examples: One- to 10-year time horizon
and beyond
Source: Booz & Company
4 Booz & Company

7. An Application Example:
Customising the E-Health Investment Model for Australia
To customise the Booz & Company Global E-Health Investment Model
for this study, model inputs were based on publicly available healthcare
statistics, and key assumptions were adjusted to reflect the financing
structure of the Australian healthcare industry. Where research identified
a range of potential benefits, conservative figures were applied. Where
Australian data was not readily available, benchmarks derived from previous
Booz & Company e-health engagements were used.
Our high-level modelling for Australia is focused on the perspectives of
stakeholder groups within four major areas:
• Healthcare providers, including the nation’s general practitioners (GPs),
public hospitals and outpatient centres, private hospitals, and nursing
homes
• Patients—individuals who access Australian healthcare services
• Governments, including the Federal Government (through its role operating
Medicare Benefits Scheme, Pharmaceutical Benefits Scheme, and
Department of Veterans’ Affairs) and the governments of the states and
territories
• Private payors, including the nation’s private health insurance organisations
Note that the investment model is very flexible and that different stakeholders
and applications can be added at any time to derive new perspectives and
insights.
The investment model is an
essential tool for planning the
scope of an optimal e-health
program and setting its priorities.
Booz & Company 5

8. INTRODUCING Australia has one of the world’s
healthiest populations in terms of
history, thus eliminating price discrimi-
nation based on age, health status, and
AUSTRALIA’S average life expectancy and infant claims history.
HEALTHCARE mortality rates. Australian healthcare
spending per capita is far lower than For all of its advantages, Australia’s
SYSTEM that of the highest-spending nations, healthcare system, like the systems of
such as the United States. The total most developed nations, is under
annual spend on healthcare is approxi- increasing pressure due to a shortage
mately AU$103.6 billion (US$96.7 of trained health professionals, the
billion) with almost 69 percent of the suboptimal distribution of services,
total funded by Australia’s Federal and and the increasing demand for care,
State Governments.1 which is driven in part by demo-
graphic change. The patient journey
With the exception of emergency within the current system is hampered
visits, patient flow in the Australian by disjointed communication and
healthcare system is generally routed limited access to quality information.
through general practitioners (GPs). These problems are compounded by
These physicians play a gatekeeper Australia’s dispersed population and
role and help to coordinate other the significant distances patients and
healthcare services for their patients. providers must travel in remote and
rural areas.
A majority of the Australian popu-
lation has access to a guaranteed As a result, the Australian healthcare
minimum level of care through public system is exposed to delays in access-
funding, and thus employers play a ing information and services. The
limited role in healthcare decisions. ability to make sound decisions about
Public health insurance and primary care is often impaired, and there are a
care are funded largely at the Federal significant number of adverse effects
level; hospital-delivered acute care is and high levels of frustration, particu-
funded at the state level. Australian larly among patients who are elderly,
private healthcare insurance is based disabled, or suffering from chronic
on community health ratings, as conditions or mental health disorders.
opposed to an individual’s medical
A majority of the Australian
population has access to a guaranteed
minimum level of care through public
funding, and thus employers play a
limited role in healthcare decisions.
6 Booz & Company

9. THE STATE Australia was one of the first nations
to recognise the potential and benefits
ity between hospitals and community
healthcare providers remains a key
OF E-HEALTH of e-health, which led to a number of issue that only a handful of projects
IN AUSTRALIA initiatives in the 1990s designed to
encourage GPs in private practice and
have begun to address. Furthermore,
there is an overall lack of investment,
other primary care providers to com- accountability, and shared goals in
puterise their facilities and use shared Australia’s e-health programs. This
electronic health records (EHRs) for is creating insecurity, confusion, and
specific patient segments. As a result, frustration among the healthcare sys-
today 95 percent of Australia’s GPs are tem’s primary stakeholders, especially
computerised versus 46 percent in the patients who expect clinicians to have
United States.2 access to meaningful information at
the point of care.
E-health in Australia gained further
momentum with the creation of Although a national e-health strategy
the National E-Health Transition has been developed for Australia, a
Authority (NEHTA) in 2005 and general reluctance to commit fund-
with subsequent efforts to identify a ing, resources, and political weight
common set of standards for shar- to the implementation effort remains.
ing information and to create greater Missing key elements are a clear,
levels of stakeholder engagement. In shared understanding of the benefits
parallel, a series of state-based e-health e-health investments can bring and
initiatives focussing on the public the quantification of the financial
hospital sector also emerged and impact that e-health initiatives have
began rolling out EMR solutions to on the system’s major stakeholders.
selected sites. The e-health investment model has
been applied in this study to highlight
Despite the relatively high adoption of these issues.
IT amongst Australian GPs, connectiv-
Booz & Company 7

10. DEFINING AND providers, and through better
self-management of their health
This analysis clearly reveals that
approximately two-thirds (AU$5.1
QUANTIFYING by patients billion) of the quantifiable e-health
E-HEALTH • Better utilisation of healthcare
benefits in Australia can be attributed
to two benefit categories: reduced
BENEFITS infrastructure, including reductions errors and enhanced adherence to best
in the average stay length and wait practices.
times
The majority of savings stem from
• Avoidance of the duplication of the reduction of errors in medication.
To calculate the benefits of e-health, efforts (e.g., lab tests, X-rays) Adverse drug events (ADEs) occur
the investment model must organise when the wrong drug or the wrong
them into distinct categories. In our • Optimise use of pharmaceuticals dose of a drug is prescribed or
study, the categories were clearly (including generics) dispensed, when a drug’s effects are
defined to avoid double counting and dangerously altered by a patient’s
to ensure internal consistency and • Enhanced health workforce preexisting conditions, or when a
comprehensiveness. In the Australian productivity due to greater dangerous reaction occurs with one or
case, only the benefit categories that efficiencies in obtaining patient more other drugs the patient is using.
could be quantified based on current information, record keeping, In Australia, ADEs are estimated
literature and publicly available administration, and referrals to affect 10.4 percent of patients
statistics were incorporated into the treated by GPs each year, and about
investment model. These categories When the e-health investment model half of these events are classified as
are as follows:3 is used to calculate the economic value moderate or severe, with 138,000
of these benefit categories, we find that cases requiring hospitalisation.4
• Better health through reduced the successful rollout and adoption of It has also been estimated that as
errors in diagnosis, medication, and core e-health capabilities in Australia many as 18,000 Australians die each
treatment without medication are expected to be worth an estimated year as a result of ADEs.5 The most
AU$7.6 billion annually by 2020 (see commonly acknowledged causes of
• Better health through enhanced Exhibit 2 ). ADEs are disjointed patient/provider
adherence to best practices by communication and limited access to
Exhibit 2
Economic Value of Australian E-Health in 2020 by Benefit Category
STEADY-STATE ANNUAL BENEFIT CATEGORY BREAKDOWN
(%, AU$ BILLIONS)
Total Annual Benefit = AU$7.6 billion
Optimal use of pharmaceuticals
(including generics) 2.3% ($0.2B) Reduction of errors
36.0%
($2.8B)
Eliminating duplication of effort 8.1%
($0.6B)
8.2%
Improved use of infrastructure ($0.6B)
14.7%
($1.1B) 30.6%
Enhanced workforce productivity ($2.3B)
Enhanced adherence to best practices
Source: Booz & Company Global E-Health Investment Model
8 Booz & Company

11. patient information at the point of model can also quantify well-being potentially lead to the deferment of
care. E-health capabilities such as and efficiency benefits, such as the other capital investments in public
medication management applications number of deaths, care visits, X-rays, primary care clinics, hospitals, or
can significantly reduce ADEs. and tests that could be avoided. See additional emergency care facilities.
Exhibit 3 for our analysis of the
The second most economically cumulative value of these benefits to As previously mentioned, there are
valuable benefits category is enhanced Australia over the next 10 years, based also significant additional benefits
adherence to best practices. Decision on a conservative rollout schedule for from e-health that we have not
support tools for providers that e-health applications and adoption quantified, such as enhanced disease
incorporate prevention guidelines rate by patients and practitioners. surveillance and reductions in the
and best practice care plans can inappropriate use of healthcare
reduce unnecessary admissions. Risk The investment model reveals that a services. For example, e-health
stratification and targeted disease commitment to a full e-health program security and identity management
management programs are additional now could help Australia avoid an applications can significantly reduce
best practice applications that can estimated 5,000 deaths annually the incidence of fraudulent claims
create substantial savings. Further, once the system is in full operation.6 made on public and private healthcare
e-health services and tools, such as Furthermore, the model estimates that schemes. The National Health Care
PHRs (personal health records that more than 2 million primary care and Anti-Fraud Association in the U.S.
allow patients to track and control outpatient visits, 500,000 emergency conservatively estimates that 3 percent
their own health information) linked department visits, and 310,000 of all healthcare spending is lost to
with medical devices, can help hospital admissions could also be fraud, and other international studies
patients, particularly those with avoided per year. These results would have had similar results, giving an
chronic conditions, better manage represent substantial improvements indication of the potential savings in
their own health. in the convenience of care and this area.7
satisfaction for patients, as well as
Besides calculating the economic relieve the current supply pressure in
benefits of e-health, the investment the healthcare system, which could
Exhibit 3
Additional E-Health Benefits Quantified, 2010–2020
DEATHS AVOIDED VISITS AVOIDED LAB AND X-RAY TESTS AVOIDED
10,418 2,200,000 7,331,933
2,028,002 7,000,000
10,000 # of deaths avoided
(extrapolated from # of avoided # of avoided
1,800,000 outpatient visits 6,000,000 lab tests
RAND study)*
8,000
5,000,000
1,400,000
6,000 5,273 4,000,000
1,000,000 3,000,824
3,000,000
4,000 # of
# of deaths avoided
541,486
600,000 2,000,000
avoided ED visits
2,000 (conservative) 310,352 # of avoided
# of 1,000,000 X-ray exams
200,000 avoided
0 0 hospital 0
2010 2012 2014 2016 2018 2020 admissions
2010 2012 2014 2016 2018 2020 2010 2012 2014 2016 2018 2020
- Reduced Errors - Reduced Errors (enabled by medication - Reduced Duplication of Efforts
(enabled by medication management) management) (enabled by summary care record)
- Enhanced Best Practices (enabled by
quality and performance management)
1 Localized estimates from RAND study J. Bigelow et al (2005)
* Localised estimates from RAND study, J. Bigelow et al., 2005.
Note: Well-being benefits that are expected to accrue over the years will also lead to reductions in capital infrastructure costs which have not
Notes: Figures are annual estimates. Well-being benefits that are expected to accrue over the years will also lead to reductions in capital infrastructure costs, which have not been
been captured in modeling to maintain a conservative view
captured in modelling in order to maintain a conservative view.
Source: Booz & Company Global E-Health Investment Model
Booz & Company 9

12. ANALYSING An e-health investment model must be
able to analyse a core set of e-health
Political jostling and powerful
special interests often affect the
E-HEALTH applications and capabilities if it prioritisation of different applications
APPLICATIONS is to provide adequate support to
decision makers (see “Core E-Health
and capabilities in healthcare systems.
In systems that are heavily funded
AND Applications and Capabilities by governments, like Australia’s,
CAPABILITIES Defined,” page 12). this often skews decisions towards
care settings that receive the most
All e-health applications and public funding. For example, EMR
capabilities require an infrastructure systems are often the first e-health
to connect providers within and application implemented, even though
across healthcare settings. Shared implementing networked medication
infrastructure often represents the management capabilities for private
majority of the investment required GPs can deliver more economic
for an e-health program, but it is benefits and do more to relieve
the core e-health applications and pressure on hospital infrastructure.
capabilities that drive the anticipated
benefits. Further, the core applications A rigorous investment model can
and capabilities are not always help the leaders of large healthcare
entirely exclusive of one another. systems avoid suboptimal decisions
They are often combined according to and priorities by quantifying the
group and end-user functionality so benefits of different applications
that features can be prioritised and capabilities. See Exhibit 4 for
for implementation. the results of such an analysis and
Political jostling and powerful special
interests often affect the prioritisation
of different applications and
capabilities in healthcare systems.
10 Booz & Company

13. the relative benefits for each major capabilities are essential prerequisites fied in terms of benefits. This does
e-health application capability in for this capability, so it requires addi- not mean that the respective ROI is
Australia. tional investment. zero or negative; rather, it means that
in our rigorous evaluation (based on
Our analysis reveals that a shared The benefits of a stand-alone EMR academic research, including thorough
medication management capability capability are also significant. They randomised control trials), there was
would deliver a third of the estimated center on efficiency and productivity not sufficient proof to quantify these
AU$7.6 billion in total annual benefits improvements. Additional efficiency factors. As such, the quoted total ben-
that could be realised from e-health gains are also possible through the efit numbers are conservative.
in Australia. This is largely due to avoidance of duplicated lab tests and
its potential to reduce the ADEs that X-rays. But it must be noted that the Moreover, the results only quantify
result in unnecessary outpatient visits, benefits of EMR systems are less sig- direct savings in the healthcare system
emergency care visits, and hospital nificant if summary clinical informa- itself. They do not include economic
admissions. tion for patients is not shared across flow-on effects that can be substantial.
other healthcare institutions and For example, a GDP impact of
A quality and performance manage- care settings. between AU$7 billion and AU$9 bil-
ment e-health capability also has lion by 2019 as a result of a shared
substantial potential for estimated Note that there are capabilities such electronic health record service in
benefits of AU$1.6 billion per year, as connected care and identity and Australia has been estimated.8
but EMR and summary care record access control that were not quanti-
Exhibit 4
Annual Value of E-Health Applications and Capabilities
STEADY-STATE ANNUAL VALUE
(10-YEAR INVESTMENT HORIZON, 2010–20)
AU$ B Total = AU$7.6 billion
3.0 2.7
2.0
1.6
1.5
1.0 0.9
0.5 0.4
0.0
Medication Quality and EMRs Patient Self- Decision Summary
Management Performance Management Support Care Records
Management
Source: Booz & Company Global E-Health Investment Model
Note: Due to a lack of detailed Australian data, EMR benefits have been extrapolated and adapted from overseas modelling results. The number indicated is a best estimate which may
vary widely, depending on individual institutional implementation status and best practice use of these systems.
Booz & Company 11

14. Core E-Health Applications and Capabilities Defined
Connected care enables the electronic transfer of referral information from
one provider to another and supports shared care plans where multiple
providers are involved with the case treatment of a patient over time.
Decision support provides clinicians with access to guidelines, reminders,
and best practices to improve patient outcomes by helping them to make
more informed and cost-effective decisions.
Electronic medical records extend a clinical information system with
comprehensive patient records, imaging, specialised clinical tools,
and interfaces to the local administrative systems within a healthcare
organisation.
Identity and access control provides the security infrastructure needed to
maintain patient privacy, effectively identify and authenticate providers and
patients, and control access to facilities and health information.
Medication management provides clinicians, patients, and dispensing
pharmacies with information regarding a patient’s current and past
CONSIDERING
medications, allergies, and basic medication-related decision support in STAKEHOLDER
the quest to eliminate medication errors.
GROUPS
Patient self-management provides patients with a portal view for managing
their health records and researching health topics. In addition, the
capability can provide secure, private patient communications with
clinicians, enabling more effective participation in disease management
programs and avoiding unnecessary visits to a clinic. Although quantitative insights into the
Quality and performance management provides a comprehensive benefit levels of e-health applications
database supporting intelligent performance reporting, monitoring, and and capabilities help to prioritise and
the revision and improvement of care guidelines and best practices. It can justify funding, a robust understanding
also support clinical trials and academic research. of the various stakeholders is also
required to quantify the flow-on effects
Shared summary care records (also referred to as EHRs) provide clinicians of the applications and capabilities.
with summarized descriptions of the medical events in a patient’s history The stakeholder dimension in
that may pertain to the current treatment, along with electronic access to economic modelling also provides
detailed procedure, laboratory, and radiology reports. insight into the change management
effort that will be needed to implement
applications and capabilities
successfully. For example, this
dimension enables the identification of
stakeholders that may offer resistance
or require financial incentives to adopt
the new technology.
When we apply the investment model
to major stakeholders in Australia’s
healthcare system, the gross annual
benefits by stakeholder group are
revealed (see Exhibit 5).
12 Booz & Company

15. Note that the analysis of e-health healthcare system. In healthcare of the total AU$7.6 billion in annual
value differentiates between its systems such as Singapore’s, where e-health benefits in a steady-state
sources (the stakeholder group that there is a greater out-of-pocket scenario arise from the connectivity
has implemented e-health within payment for healthcare services, one of private GPs. This suggests that
a care setting) and its beneficiaries large payor group are the patients even though 95 percent of GPs
(the stakeholder group that actually themselves. In Australia, they in Australia already have stand-
realises the benefit). This confirms are mostly the State and Federal alone EMR systems, they lack the
and highlights the misalignment of Governments, and they would share connectivity needed to gain the full
costs and benefits in the Australian a combined 68 percent of the benefits benefit of sharing event summaries and
healthcare system. from e-health, an estimated AU$5.2 medication details about their patients
billion annually. with other providers. One potential
What is often not recognised is that explanation for this is that private
the greatest beneficiaries of e-health The analysis of stakeholder benefits GPs are reluctant to connect their
are usually the payors within the also indicates that nearly AU$5 billion EMR systems without some form of
Exhibit 5
Annual E-Health Benefits by Stakeholder Group in Australia
STEADY-STATE ANNUAL BENEFITS
(YEAR 2020)
AU$ M
5,000 $4,850.2
By source (total gross benefits in 2020 = AU$7.64 B)
4,000 By beneficiary (total gross benefits in 2020 = AU$7.64 B)
3,000
$2,561.5 $2,602.7
2,000
$1,527.3
$1,171.1
$1,005.9
1,000
$625.6
$143.6 $211.3 $108.2 $150.7 $145.8 $180.3
$0.3 $0.0 $0.0 $0.0 $0.0
0
Private Public Public Private Long-Term Patients State Gov. Fed. Gov./ Private
GPs Hospitals Outpatients Hospitals Care Medicare Insurance
Providers Payors
Source: Booz & Company Global E-Health Investment Model
Booz & Company 13

16. incentive or subsidy that would enable primary care setting. This is confirmed would be sharing EMRs for their
them to recoup their investment, thus by an analysis of the flow-on benefits patients; it does not include program
allowing other stakeholders to realise from shared e-health capabilities overheads to develop a shared
the full value of this benefit. across GPs (see Exhibit 6). e-health infrastructure. The benefits
will accrue through reduced errors
Further, the bulk of Australia’s The analysis of primary care value and enhanced adherence to best
e-health investment to date and the generation reveals that the flow-on practices, and result in a reduction
planned focus of current programs benefits of this investment would be in unnecessary visits to public and
are directed mainly towards acute AU$668,000 per annum per GP clinic private hospitals. The analysis also
care settings. This is a response to the at a direct cost of approximately makes a highly compelling, effective
growing demand for services within AU$3,000 per annum per practice to case for Australia’s State and Federal
the hospital sector, but it fails to establish and maintain connectivity. Governments to fund the required
address the underlying driver for this Note that this cost reflects the infrastructure to connect GPs because
demand and the area from which the majority of GP clinics already being the governments will be the primary
greatest value could be gained—the computerised and assumes they recipients of the resulting value.
Exhibit 6
Annual Value Generation from Primary Care, per GP Clinic
Benefit Type Realised Beneficiary
AU$ (in thousands) Long-term
$668 $668 care 15 $668 Patient
700 7
17 Approximately 10% of 21 17 GPs
600 21 clinic events affected: Private Private health
161 132
- 66 emergency department hospitals insurance
500 286 visits avoided
400 - 36 inpatient hospital 241 State gov.
admissions avoided
300 Public
- 245 outpatient visits avoided 439
200 hospitals
337 - 84 X-rays avoided
263 Federal gov.
100 - 0.7 patient lives saved
46 GPs
0
Breakdown of Locations in Which Breakdown of
Benefit Types Benefits are Realised Beneficiary
Stakeholders
Avoiding duplication of efforts
Increased workforce productivity
Optimised use of generic pharmaceuticals
Better health through adherence to best practices
Better health through reduced errors
Note: Number of GP clinics = 7,261.
Source: Booz & Company Global E-Health Investment Model
14 Booz & Company

17. BETTER The failure to understand and
effectively communicate the benefits
capabilities to connect primary care
as a priority. Its key conclusions are
HEALTHCARE of e-health has been a major applicable across healthcare systems
IN AUSTRALIA impediment to the implementation of
e-health in Australia and many other
and bear emphasis:
AND ELSEWHERE developed countries. But with the • Developing a business case for
right tools, sound, informed decisions any major reform of a complex
can be made that are based on a networked system such as
clear understanding of how value is healthcare requires a holistic
created from e-health applications and approach to determining the
capabilities in different care settings, costs and benefits derived by
and how value flows through to multiple stakeholders by providing
different stakeholders. a combination of different
capabilities over time.
This is important because the
value inherent in computerising the • Investment in comprehensive
healthcare sector has wide-ranging e-health programs can lead to
implications and can significantly substantial savings in annual
enhance reforms, including those national healthcare expenditures
currently being discussed in Australia. (in the case of Australia, this will
For example, activity-based funding equate to an estimated AU$7.6
and better performance transparency billion at minimum in 2020
in the system are enabled by the alone, representing 3 percent
quality and performance management of the nation’s total healthcare
capability, while, as previously noted, expenditures, given current trends).
demand on emergency departments is
influenced by medication management • The largest type of benefit from
and decision support. As such, e-health is the reduction of adverse
e-health is an important enabler for drug events caused by the lack
any modern healthcare reform effort. of access to pertinent patient
information at the point of care.
The economic analysis described
above outlines this rationale and • Of the core e-health applications
highlights the importance of and capabilities, the one with the
providing e-health infrastructure and greatest benefits is medication
E-health is an important enabler for
any modern healthcare reform effort.
Booz & Company 15

18. management. Other capabilities, defines the standards for sharing explicit infrastructure proposed for
such as quality and performance information across different Australia and it is difficult to compare
management and electronic medical organisations costs from other countries since each
records (EMRs), offer significant country’s e-health program is at a
but secondary benefits. • A comprehensive set of user different stage and invariably includes
requirements sourced from clinical different applications. However,
• The implementation of e-health representatives and encompassing experience and published figures from
capabilities in primary care drives the findings of the latest research Canada, Germany, the U.S. and many
the majority of systemic benefits. into e-health benefits others, suggest a typical investment in
However, these benefits are not the range of AU$200 to AU$400 per
realised in the primary care setting • A fully considered implementation head, although some countries spend
itself but flow on to acute settings approach that gives appropriate much less—or much more. That
through the avoidance of hospital weight to stakeholder engagement translates to roughly AU$4 billion to
visits. at each step in the transformation AU$8.5 billion for a full deployment
process, as well as guaranteeing of e-health functionality throughout
Of course, an investment model privacy and security Australia. In other countries, these
alone cannot guarantee the successful costs are most often borne by
implementation of e-health initiatives • An implementation road map Governments, although there are
or realisation of their anticipated that ensures the prioritisation of innovative approaches including
benefits. Indeed, there are many capabilities in a way that delivers large-scale private/public partnerships
critical success factors that need to the most benefits and alignment (PPP) that have been successful in
be considered when taking a holistic with policy and regulatory reforms bringing the private sector into the
approach to an e-health strategy. equation.
Among them: • Effective incentive schemes that
encourage the early adoption—as As Australia and other nations con-
• An appropriate governance model well as the appropriate ongoing tinue to take cautious steps towards
or innovative public–private use—of e-health application the large-scale implementation and
partnerships to help fund, capabilities and information adoption of e-health, many lessons
implement, and operate the sharing throughout the system have been learned and the potential
e-health solution benefits of e-health have been compel-
• Robust benefits realisation lingly confirmed. Now more than
• Consideration of long-term framework and tracking ever, we need the leadership, the
trends in e-health, such as mechanisms that ensure that willpower, and the tools to invest
enhanced provider technologies, anticipated benefits are accounted wisely in the future of healthcare
home care, personal medicine, for during the life of the delivery services and proactively
and Medicine 2.0 implementation program address the mounting pressures our
healthcare systems are facing. Our
• A clearly defined national We have not mentioned costs in this health and collective futures demand
interoperability architecture that Perspective as there has not been an nothing less.
16 Booz & Company

19. Endnotes
1
“Health Expenditure Australia 2007–08,” Australian Institute 5
AHHA, 2008. www.consultmagazine.net/StoryView.
of Health and Welfare, September 2009. www.aihw.gov.au/ asp?StoryID=469420
publications/index.cfm/title/10954 6
Based on the assumption that the pattern for adoption and
2
“A Survey of Primary Care Physicians in 11 Countries, 2009,” technology rollout will be similar to e-health projects in other
Commonwealth Fund, 2009. www.commonwealthfund.org/ developed countries.
Content/Publications/In-the-Literature/2009/Nov/A-Survey-of- 7
“The Problem of Health Care Fraud,” National Health Care
Primary-Care-Physicians.aspx
Anti-Fraud Association. www.nhcaa.org/eweb/DynamicPage.
3
There are additional categories for less quantifiable e-health aspx?webcode=anti_fraud_resource_centr&wpscode=
benefits that could be considered, such as reduced fraud and TheProblemOfHCFraud
enhanced disease surveillance, but these were excluded from 8
“Economic Impacts of a National Individual Electronic Health
Australia’s economic modelling due to the limited availability of
Records System,” Allen Consulting Group, July 2008.
public data.
4
“Adverse Drug Events: Counting Is Not Enough, Action Is
Needed,” Medical Journal of Australia, 2006.
About the Authors
Chris Bartlett is a Vanessa Wallace is a
Booz & Company senior Booz & Company partner
associate based in Sydney. based in Sydney. She is a
He specialises in strategy leader in the financial services
development and technology practice and has held multiple
innovation, mainly for clients in governance roles at the highest
the healthcare and telecommu- level within the firm’s global
nications industries. partnership. During her 20 years
of experience, her strategy work
Klaus Boehncke is a has involved agenda-setting,
Booz & Company principal capability-building programs
based in Sydney. He leads the across multiple industries
firm’s health practice in the including consumer products,
ANZSEA region. He focuses healthcare, insurance, wealth
primarily on large-scale e-health management, and banking.
transformation programs.
Andrew Johnstone-Burt is
a Booz & Company partner
based in London. He leads
the firm’s global public sector
business. Andrew specializes in
providing strategic advice and
leading major transformation
engagements with private- and
public-sector clients.
Booz & Company 17

20. The most recent Worldwide Offices
list of our offices
and affiliates, with Asia Bangkok Helsinki Middle East Houston
addresses and Beijing Brisbane Istanbul Abu Dhabi Los Angeles
telephone numbers, Delhi Canberra London Beirut Mexico City
can be found on Hong Kong Jakarta Madrid Cairo New York City
our website, Mumbai Kuala Lumpur Milan Dubai Parsippany
www.booz.com. Seoul Melbourne Moscow Riyadh San Francisco
Shanghai Sydney Munich
Taipei Oslo North America South America
Tokyo Europe Paris Atlanta Buenos Aires
Amsterdam Rome Chicago Rio de Janeiro
Australia, Berlin Stockholm Cleveland Santiago
New Zealand & Copenhagen Stuttgart Dallas São Paulo
Southeast Asia Dublin Vienna DC
Adelaide Düsseldorf Warsaw Detroit
Auckland Frankfurt Zurich Florham Park
Booz & Company is a leading global management
consulting firm, helping the world’s top businesses,
governments, and organizations.
Our founder, Edwin Booz, defined the profession
when he established the first management consulting
firm in 1914.
Today, with more than 3,300 people in 60 offices
around the world, we bring foresight and knowledge,
deep functional expertise, and a practical approach
to building capabilities and delivering real impact.
We work closely with our clients to create and
deliver essential advantage.
For our management magazine strategy+business,
visit www.strategy-business.com.
Visit www.booz.com to learn more about
Booz & Company.
©2010 Booz & Company Inc.