2 ways to encourage investment in healthcare

Traditionally, companies and governments have viewed health as a cost, not an investment. No one disputes that poor health is a cost for businesses and society. But thinking about health only as a cost misses an important point. As healthcare costs continue to outpace GDP by 2%-3% per year, many stakeholders have come to realize that an investment in health is actually an economic imperative. In times when sustainable investment opportunities are scarce, new investment opportunities are welcome.

Intuitively it is clear: Healthy people create a competitive advantage for both businesses and society through increased productivity, reduced healthcare costs and higher levels of consumption and well-being.

Recently, we have seen a paradigm shift: Healthy Life Years have become the new currency of economic growth and prosperity. While we have seen a dramatic increase in life expectancy (more than 50% in the US in the last 100 years), we have to acknowledge the huge amount of unhealthy life years this has added. Although we are living longer, we are not living healthier. In fact, for every year we live longer, we live only 0.8 years in a healthy state. This means that, if the average American lives 78 years, 10 of those years will be lived in a state of disability, adding up to high costs for companies and societies.

Maximizing Healthy Life Years will have a positive effect on a country’s economic prosperity. Populations that live longer in a healthy state are more productive over a longer time period and consume more during that extended life. Furthermore, a healthy population is able to work for a greater number of years before retirement, resulting in less drain on social welfare programmes or company retiree medical benefits.

Winning companies and societies will invest in Healthy Life Years and, by doing that, fuel the “virtuous cycle of health”. As they look for sustainable growth opportunities, they will need to gather new ideas from different sectors beyond traditional healthcare, with potential investments at the individual, employer and population levels.

To encourage new investments in health, we have identified some practical actions to take. The health ecosystem with its seven settings ‒ the physical, political, workplace, educational, social, media/information technology and the healthcare environment ‒ offers many sustainable investment opportunities for different business sectors, not only healthcare.

Two strategic pathways exist for investing in health:

1. Creating healthy offerings targeted to individuals (iROI) who take care of their health to support, enable or incentivize their healthy lifestyle; this way, adjacent and new premium consumer care markets can be developed – for example, personalized nutritional solutions incorporating exercise level, special nutritional needs and personal taste or mobile decision-support solutions, helping individuals make better trade-off decisions.

2. Investments at the population level (pROI) will often require governments and the private sector to work together; the combined approach with aligned incentives will help overcome the issue of who pays and who benefits. An example is the public-private partnership between the government of the Philippines and a global food and beverage company to improve nutrient supply for young children of the lowest income groups. Another example is the “Start Smart for Your Baby” initiative, which is a comprehensive pregnancy management programme from pre-conception to the first years of a child resulting in a substantial decrease of extremely low birth weight newborns and the high medical costs and family complications associated with it.

The approaching tsunami of non-communicable diseases – like cardiovascular diseases, diabetes or mental illness – creates an urgent need for action, but it also offers many sustainable investment opportunities for businesses and society. These investments will be most effective if they are tackled collaboratively with governments and regulators who are setting the framework for action. Winners will identify the most profitable opportunities for investment now and take action.

Author: Norbert Hultenschmidt, Partner, Director and Head, Healthcare Practice, Europe, Middle East and Africa, Bain & Company, Switzerland

Image: An employee massages a baby at the CareBay maternity care centre in Shanghai December 16, 2011. REUTERS/Aly Song