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Healthcare Spending Poised for Global Surge

 |  By John Commins  
   December 10, 2010

Global spending on healthcare will surge by $71 trillion—an increase of more than 50%—by 2020, with the greatest growth coming from emerging markets in Brazil, Russia, India, and China, according to a new report from PricewaterhouseCoopers.

Health spending in these countries is rising faster than gross domestic product, exposing gaps in budget deficits and prompting governments to look to public-private partnerships for better value, PwC said in its report, Build and Beyond: The (r)evolution of healthcare PPPs.

The report identifies as a growing trend the use of PPPs to finance and manage health infrastructure and delivery, which PwC said could create a multi-trillion global market opportunity for private companies and investors, implement a more efficient use of taxpayer dollars, and improve healthcare quality.

"The public finance of private innovation and efficiency is a win-win-win for governments, private industry and patients," said David Levy, MD, global health leader, PwC. "Public-private partnerships offer the opportunity to increase access and quality of care, bend the cost curve on health spending and create accountability for health systems among groups that previously haven't had appropriate incentives to work together."

Public health authorities around the world are increasingly contracting with private entities to manage healthcare services for defined populations or markets. These PPPs—which have been used for infrastructure finance—are evolving as way to slow the rising cost of healthcare and address larger problems in the health system.

PPPs enable public health authorities to maintain oversight of standards while injecting private sector fiscal discipline, innovation, and efficiencies that are driven by incentives to generate long-term savings and improve quality, PwC said.
The market for PPPs is expected to grow significantly over the next five years, because the model can save healthcare costs. For example, Spain's Alzira project, which includes hospital and primary care services, saved the government 25% of the cost of providing care, PwC said.

Competition for private capital has prompted governments in Europe, Asia, Africa and southeast Asia to establish PPP agencies to develop policy recommendations, streamline procurement and contract for services, PwC said. 

"The keys to the success of PPPs as they move beyond building infrastructure to long-term delivery of clinical services will be in contracts that clearly establish performance goals around quality and health outcomes," said Kelly Barnes, U.S. Health Industries Leader, PwC.

In 2010, a number of record-setting PPPs formed across three continents to finance hospital infrastructure, including a new 700-bed Karolinska Solna University Hospital in Stockholm, Sweden, the largest hospital PPP in the world. Other deals were made in Canada, Mexico, Africa and Spain.

  While the deals are dominated by infrastructure projects, they are also expanding the market for private capital and expertise in health services. As the scope of the partnership projects in healthcare grows, so does the size of the potential market for private companies, PwC said. 

PwC estimates that:

  • By 2020, spending on health infrastructure among the Organization for Economic Cooperation and Development countries, and Brazil, Russia, India, and China, will increase to $397 billion annually, up from $263 billion today.   However, the larger market for health PPPs will be in non-infrastructure spending, estimated to be more than $7.5 trillion annually, up from $5 trillion in 2010.

     

     

  • Between 2010 and 2020, OECD and BRIC nations will spend cumulatively $3.6 trillion on health infrastructure and $68.1 trillion on non-infrastructure health spending.

     

     

  • Health spending in the United States accounts for half of all health spending among OECD nations. However, the biggest growth will be outside of the U.S. According to PwC projections, the countries that are expected to have the highest health spending growth between 2010 and 2020 are China, where spending is expected to increase by 166%, and India, which will see a 140% increase.

     

     

  • Among OECD countries, health spending as a percent of GDP will increase to 14.4% by 2020, up from 9.9% in 2010. Among BRIC nations, health spending as a percent of GDP is expected to increase to 6.2% in 2020, up from 5.4% in 2010 as their economies grow and they build out their health systems. In actual spending, this amounts to a 117% increase in spending over the decade, with China leading the way.

     

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.

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