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The structural challenges for healthcare industry evolution in Brazil

The healthcare market is facing major structural challenges and the background of these challenges lies in changes to the age structure composition of the Brazilian population and its aging prospects. Subjects with confusing cause and effect, as longer life for patients and changing disease profiles that went from fatal to chronic diseases, are generating new needs to be serviced by the healthcare industry.

While technological developments in areas of prevention (diagnosis) and treatment (pharmaceutical) appear as a substitute for medical procedures, the public health system with its universal coverage proposal has not ably embraced the demands resulting from these facts.

Thus, we found the private sector now has received the burden of complying with procedures and medication, through regulatory agencies that demand a higher number of requirements in the coverage of health plans. The immediate consequence is the considerable impact on operating costs and reduced profitability of services. At the other end, regulatory agencies also limit the adjustment of prices charged to users, making it impossible to recover profitability. So, what remains is working on management gaps involved in the processes that have long been discussed by the industry, but are still partially addressed, with good opportunities for progress. Given the model this market is commercially structured, which requires great interaction between players, there are overlapping management gaps in each of the segments, creating a "snowball" effect that ends up increasing the complexity and responses for all parties involved in the process.



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Illustration: map at a high level of commercial model for healthcare market.

We can highlight some of the main challenges in the industry:

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In addition to these specific challenges for each player in the industry, there are also some like the process involving non-payment from the health plan to the service provider (divergence in the process generating impact on cash flow and financial routines), which permeate through the entire industry value chain. To overcome these challenges, it is possible to list two large action groups, from more targeted actions focused on the daily routine that we can identify as reviewing the operating model, to more strategic and long-term solutions, demanding technology and integration with other players in the market therefore generating medium to long term initiatives. Among the group of initiatives related to reviewing the "Operating Model", we can mention for:

Healthcare Plans and Insurance Providers:

  • Analysis of the financial model, focused on claims and costs of procedures and benefits, considering statistical analysis on the use of services such as refunds, guiding actions such as targeting initiatives - differentiated remuneration (for licensed professionals) according to usage volumes, patient loyalty, etc., encouraging growth of the network of licensed professionals and reducing operating costs.

Hospitals and Laboratories:

  • Reviewing care processes, seeking greater integration between stages (from pre-service to collection and processing/diagnosis), reducing patient waiting time at the units, waiting for their diagnosis or procedures;
  • Review of operational processes together with the technical area, seeking more efficient use of inputs while performing procedures.

Evolving to an action group focused on "Medium-long term", as we are faced with the need for new technologies and/or work methodologies based on a strong integration between players to generate greater benefits for the entire chain:

  • Electronic Medical Records: consolidating information in a single database with access to those involved in the chain (medical staff) during check-ups, consultations (emergency or not) and creating consolidated reports and analyzes (doctor's history).
  • Standardization of medical procedures for investigation and diagnosis, integrating Healthcare Plans and Insurance Providers to Hospitals and Laboratories, setting procedures developed collectively by the entities' medical areas, serving as guidance for examinations according to assumptions identified by the doctor, such as tests performed in phases, evolving per standard responses obtained in the initial tests. These protocols ultimately provide financial benefits to the Healthcare Plan and improve assertiveness of diagnosis, as well as a more complete breakdown for investigations performed by healthcare professionals, with clear benefits to the customer, who will have a faster response, accelerating the eventual start of treatment.

Therefore, without understanding the institution's most critical factor for management and performance, considering its position in the chain and the level of interdependence with other players, there is a risk of investing in solutions and strategies that stand out as novelties in the market, but given the context of the institution will not bring the expected benefits and may even incur in higher costs. Thus, it is important to identify which opportunities exist in the organization, to direct the necessary approach:

  • For the "Operating Model" group, it's ideal to address the review of internal processes in a structured and progressive way in several support areas (Supplies, Service, Finance, etc.) going from Cost Reduction/Performance Improvement analysis to reviewing the Organizational Model (e.g.: SSC deployment).
  • For the "Medium-Long Term" group, its focus will be more strategic, which will require a thorough analysis of business figures and history, enabling analysis of cost-benefit ratio for opportunities, directing future investment efforts.

In short, like other Brazilian markets in recent periods, the healthcare industry also shows constant growth and becomes increasingly competitive, from the perspective of more players and more attractive prices.

Agility in the operational process and cost rationalization become references to be pursued in strategies for market share and business consolidation.

We at Cosin Consulting have a broad experience in management and execution of these groups of solutions, and if you are interested in understanding how these subjects can be applied to the reality of your company or evaluate in more detail the results of our work, please contact us.

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