Around the world, the cost of providing healthcare is rising as changes in demographic patterns and lifestyles place ever greater demands on finite resources. Against this background, many countries are adopting variations of a funding model known as value-based healthcare, under which budgeting is directly correlated with improving patient outcomes with the goal of ensuring that spending delivers the best value for patients and the healthcare system itself.
Saudi Arabia has embarked on a comprehensive transformation of its healthcare system that will involve a complete overhaul of healthcare financing in the country. The reform – part of the kingdom’s Vision 2030 blueprint – will see a move away from the existing system where providers are paid solely for treating illness to one that will incentivise them to keep the population healthy. The implications for financial management are far-reaching, and will provide opportunities for finance professionals in a range of fields (see panel).
Analytics will inform every aspect of the system and drive decision-making
A key priority is a focus on financial sustainability. Under the value-based system, costs will be controlled by financing mechanisms that align financial incentives with patient outcomes, so promoting fiscal responsibility and system sustainability, and by reducing ineffective care and duplication of services. Increased private-sector participation in delivery will also play a significant part in keeping costs down.
Sole buyer
The task of crafting the funding mechanisms and financial incentives for the new system in Saudi has been entrusted to the newly created Center for National Health Insurance (CNHI), which will act as the sole purchaser of healthcare services on the basis of massive amounts of population health data. The CNHI is developing analytics capabilities to inform every aspect of the system and drive decision-making – from population health needs assessments and risk-adjusted capitation budget calculations to performance monitoring.
Opportunities for finance professionals
The systemic shift in Saudi Arabia’s healthcare system involves the expansion of private-sector investments in the form of public-private partnerships, and greater provision of services. These will create opportunities for financial professionals in a range of fields including roles in financial analysis and strategy focusing on value-based healthcare and risk-adjusted budgeting and, as private sector involvement expands, expertise in investment analysis and project finance for new facilities.
The shift to performance-based systems will require specialists in payment modelling and cost-benefit analysis, while the adoption of health technologies will create openings in IT investment analysis and financial modelling for digital health start-ups.
There will also be demand for professionals skilled in workforce financial planning and budgeting for training programmes, as well as change consultants to guide organisations through the transformation.
The cornerstone of the new financing system will be risk-adjusted ‘capitation payments’. Under the oversight of a newly formed Health Holding Company (HHC), healthcare providers are being transformed and organised into ‘corporatised’ local accountable care organisations (ACOs) – hybrid entities owned by the government but managed like private businesses. These will receive a fixed budget to care for a defined population, adjusted on the basis of the health risks of that population, so allowing for fair and efficient allocation of resources. The approach aims to balance the financial risks between payers and providers, while at the same time incentivising preventive care and efficient healthcare delivery.
The reforms include a financial failure regime with a multi-layer safety net
While capitation takes centre stage, the reforms also address a myriad of other financial flows within the system, each of which is being examined and re-engineered – from specialised high-cost services to cross-ACO care and interactions with private insurance.
To counter the risk involved, the reforms include a financial failure regime in the form of a multi-layer safety net composed of HHC, CNHI and Ministry of Health comprehensive monitoring and funding processes.
Gradual implementation
Given its sheer scale and complexity, the new system will be implemented in three phases. The first, already under way, involves a period of intensive data collection and analysis, which will be used to ensure accurate budgeting. Next, following the provider change programme, the ACOs will transition to ‘shadow’ capitation calculations which will run in the background so as to allow opportunity for refinement without exposure to full financial risk. The third phase will see ACOs assuming full financial responsibility for their populations. This gradual approach allows time for learning, adaptation and capability building – crucial elements in such a complex transition.
The initiative offers a case study in how financial mechanisms can drive systemic change in healthcare administration as countries around the world grapple with new ways to serve growing and ageing populations.
The views and opinions expressed in this article are those of the author.
