PwC Healthcare Roundtable – 1st quarter 2018

DaisY: Setup and operational management of an outpatient surgery center


Image source

The PwC Healthcare Round tables organized quarterly by PwC, are exchange platforms for hospital directors from French-speaking Switzerland. Topics are announced a few weeks in advance and will cover digitalization, outsourcing, the “supply chain” concept, “fee per procedure” payment, coding and pricing, as well as integrated care.

At our Q1 2018 Round table, we were delighted to host Brian Oosterhoff, operations manager of the DaisY outpatient surgery center of the eHnv (Etablissements hospitaliers du Nord vaudois). Mr. Oosterhoff provided the group with his unique insights and lessons learned on the setting up and operational management of an outpatient surgery center.

Quick overview

Ambulatory (outpatient) surgery is suitable for a large number of procedures and is not limited to minor surgery. All types of patients are eligible for this type of procedure and age is not a limiting factor. Indeed it is even recommended to use outpatient surgery for the elderly to avoid the loss of independence and cognitive decline related to hospitalization. In each case, it is imperative to analyze the patient’s context and environment to ensure that someone is available upon the patient’s return home. The evaluation is done by the surgeon and the anesthesiologist before the surgery.

A little less than 10 years after its opening, DaisY treats more than 3’500 cases per year, has an operational staff of around 15 full-time equivalents (without surgeons) and generates an income of CHF 5.6 million with an EBITDA margin of around 6%.

The most important surgeries in terms of volume are related to ophthalmology and orthopedics, far ahead of general surgery and gynecology. The center receives an average of 17 interventions per day, which results in a room occupancy rate of around 70%. The “length of stay” of a patient is on average 3.5 hours.

Success factors

Brian Oosterhoff draws in part on the 10 key recommendations in making day surgery happen published by the European Observatory on Health Systems and Policies in 2007.

By adapting them to the particular context of DaisY, he mentions in particular the following points as success factors:

  • Separate the flows between outpatient and inpatient surgery. The building of separate infrastructures is the best way to do this;
  • Separate the healthcare teams and combine it with a major investment in staff training. Indeed, specific skills are essential. The branch is organized in MOOC (Massive Open Online Courses) and in congress thanks to the International Association for Ambulatory Surgery. The training goals are multiple and cover the particularities of outpatient surgery such as analgesia as well as the follow-up of the patient so as not to make him/her sick thanks to “care maps” which allow the results to be as predictable as possible;
  • Invest in flexible infrastructure. The flexibility of the staff but also of the equipment is essential. The DaisY centre has been equipped with armchairs that can be converted into an operating table; this saves time. The admission and preparation of the patient are also very important. The medical staff takes care of this task but also of more technical work such as operating protocols script/typing as well as post-surgery follow-up of the patient. Always at the infrastructure level, the positioning of a sterilization unit near the operating theater is important (even if a large part of the equipment is for single use) as well as the open architecture that allows optimization of the work of the anesthesiologist. It should also be noted that surgeons dedicate a full day to the center in order to avoid going back and forth between the center and the hospital.

Challenges

Several major challenges hinder the use of outpatient surgery. We can quote, among others:

  • Pricing: considering outpatient surgery as standard and inpatient surgery as an exception comes up against a pricing problem in Switzerland. The new TARMED has a significant negative impact. Based on the type and number of interventions perfomed in the past, DaisY estimates that its revenues may decrease by approximately 20%. However, it is expected that due to the price decrease, a certain compensation through increasing volumes may occur. Therefore, the actual future impact is unclear at the present time;
  • The setting up of follow-up care of the patient: patients safety net and wellbeing are crucial in the field of outpatient surgery. Medical follow-up by a general practitioner at the patient’s home, often cited as an indispensable relay, is really not necessary if the patient is well informed about normal and abnormal situations in which it is imperative to call;
  • The balance between medical and administrative work: The part of the work dedicated to administrative processes such as the collection of statistics or indicators for medical societies takes up a lot of valuable health professionals’ time. The positive effects of simplifying clinical processes should not be offset by making administrative tasks more complex;
  • The alignment of incentives: this should not cost the patient more (which is fortunately not the case in Switzerland) and the hospital should not earn less for outpatient procedures than it would earn for the equivalent procedure if conducted as an in-patient procedure. The current context requires them to offset the deterrent effect of the tariff by reducing operating costs. This is possible in a dedicated center, separate from the hospital complexity and equipped with an efficient and flexible team.

In addition, the development of outpatient surgery must be accompanied by a reduction in inpatient capacity in order to ensure consistency. There are many advantages to reducing the number of beds. It has long been known that hospitals are particularly problematic places in terms of:

  • hospital-acquired infections (“Up to 7% of hospitalized patients will present with a healthcare associated infection during their treatment”);
  • loss of independence for elderly patients (“Loss of self-control, profound isolation, dependence on others, fear of death, and loss of usual frames of reference (during hospitalization for example), are all factors that can affect the patient’s independence”);
  • medication errors.

Perspectives & conclusion

Brian Oosterhoff stresses the importance of continuing the shift to outpatient surgery by increasing the number of surgical procedures performed on an outpatient basis but also by encouraging a transfer to office-based surgery. The participants were in complete agreement on the concept, even if the implementation remains quite different from one structure to another.

The digitalization of the patient’s journey as well as the simplification of processes (standardization of equipment for example) should continue to support the shift to ambulatory care by improving efficiency. This element was very well understood and anticipated by the participants even if the challenges are considerable, mainly in terms of coordination and integration of the different IT systems. Optimizing resources (mainly purchasing) and strengthening the degree of autonomy of all actors are of course crucial in this context.

In conclusion, the potential of outpatient surgery is still under-exploited in Switzerland but a step in the right direction has been taken with the February 2018 decision by the Federal Department of Home Affairs (FDHA) that six groups of interventions would be covered exclusively via outpatient care in the future. This decision aims to create a uniform regulation of these interventions for all insured persons in Switzerland, with an entry into force on 1 January 2019.

Nevertheless, the exclusive nature of the list may slow-down or limit any industry-wide shift towards ambulatory procedures in Switzerland, which until now has been led by a few pioneering centers. To further incentivize the usage of these innovative acts, DRG-type financing, but without its lower limit, could be the key to success.

Quarterly PwC Healthcare Roundtables

Are you interested in participating at our next PwC Healthcare Roundtable on 16 May 2018 in Morges? Do not hesitate to contact us (pascale.boyer.barresi@ch.pwc.com) and we will be happy to keep you informed of the theme as well as of subsequent events in the French-speaking part of Switzerland. We look forward to seeing you there!

Contact Us

Pascale Boyer Barresi, CFA
Senior Manager
Deals | Valuation & Modelling | Healthcare & Life Sciences
+41 58 792 97 42
pascale.boyer.barresi@ch.pwc.com

How healthy were hospital finances in 2016?

The Swiss healthcare sector is increasingly dynamic and competition-driven, with growing economic incentives. Our analysis of financial information from Swiss hospitals reveals that too many acute hospitals are not yet profitable enough.

On average the situation at psychiatric care facilities looks slightly better. Against this backdrop, many hospitals and clinics face major challenges when it comes to funding investments in the long term. Added to this is the fact that new healthcare delivery models, changing roles and digital technology will come to dominate the healthcare landscape as we approach 2030. Hospitals will have to be agile and open to innovation to be able to withstand this pressure and flourish.

Download an excerpt of the study alongside with analyses in interactive format on www.pwc.ch/hospitalstudy. The complete study is available in German and French.

If you have any questions, do not hesitate to reach out to us. We look forward to hearing from you.

Contacts

Patrick Schwendener, CFA
PwC | Director | Deals | Valuation & Modelling | Healthcare
Office: +41 58 792 15 08 | Mobile: +41 79 816 69 10
Email: patrick.schwendener@ch.pwc.com

Philip Sommer
PwC | Director | Consulting
Office: +41 58 792 7528 | Mobile: +41 76 516 1741
Email: philip.sommer@ch.pwc.com

Swiss hospital directors in Sweden

Stockholm, 26/27 October 2017

A delegation of 11 hospital directors from Switzerland visited Stockholm from 26 to 27 October 2017. The trip was organised and led by Brigitte Bieri, Patrick Schwendener and Philip Sommer from the PwC Switzerland healthcare team with support from Sarah Lidé and Jon Arwidson and their team from PwC Sweden in hosting and coordinating parts of the visit.

The delegation, which visits hospitals in other countries every year to gain fresh insights, thought that Sweden was an interesting country to visit, particularly with its well-regarded hospitals such as Karolinska University Hospital. Additionally, the discussions proved that some of the top challenges facing healthcare in Switzerland are similar to what Sweden encounters: (1) how do we finance future healthcare costs; (2) the different areas of governance between different levels of government (federal, regional and local) which sometime contributes to fragmented as opposed to holistic care to the patient; and (3) differences in healthcare governments across the various regions.

What left an impression from their trip was, for one, how the Swedish government has developed a clear vision and roadmap ahead for ehealth:

“You have a very developed ehealth story, which is something we can learn from.” – Nicolaus Fontana, Managing Director, Klinik Adelheid AG, Rehabilitation Center Central Switzerland.

They also found the trips to Södersjukhuset and Nya Karolinska Solna (NKS) insightful. They visited the innovative and forward-looking mockups of the future operating rooms at Södersjukhuset, and had a good discussion with the program management office, where PwC Sweden is also involved. They were impressed by the details that are tested in the mockups and the positive involvement from the staff in improving the new operating rooms. They also had the opportunity to visit the NKS showroom and hear a presentation on how NKS looks at value-based care and has engaged its staff in implementing it in their care flows. The presentation showed in a very honest way the difficulties and challenges facing during a change management process.

“How NKS has approached change management has been inspiring. We all know that change hurts, but maybe we should be more innovative in approaching this and also considers changes at the basis of our system.” – Fortunat von Planta, Director, Kantonsspital Uri and President of the Association “Zentralschweizer Spitäler”.

“It was interesting to observe the different approaches between the two hospitals towards the construction of new buildings and how and to what level they were engaging their employees in the process.” – Kerstin Moeller, Director, Spital Schwyz.

On Friday 27 October 2017, PwC Sweden hosted the delegation at the PwC Stockholm office and held a series of presentations on healthcare in Sweden, including ehealth developments, as well as discussed the implications of the General Data Protection Regulation (GDPR) on Swiss hospitals, which, though not under EU, would be impacted whenever they receive EU persons as patients. The delegation was intrigued to learn that – although the new regulations might include some administrative burden – it might also help to improve the internal processes regarding data handling.

“My hospital is just starting a project analysing its administrative processes. We suspected that there are a lot of costs being wasted in this process. Given what I’ve heard about GDPR, I’m now encouraged to include this perspective into the project as well, to see if it is addressed in our administrative processes.” – Kerstin Moeller, Director, Spital Schwyz.

The 11 hospital directors all confirmed that the trip was a great success.

“It’s good to realize that others are also just cooking with water” as Nicolaus Fontana put it. And Fortunat von Planta added: “We become aware that Switzerland has very high standards for hospitals and that a lot of the things we are doing, are very good.”

Also PwC Switzerland and PwC Sweden acknowledged the importance of such trips:

“Leveraging the power of our international network for the benefits of our clients is crucial to be truly distinctive. Thus, we need to use this power not only in specific projects but also in learning situations as experienced during this trip.” – Brigitte Bieri, Deals Healthcare Expert, PwC Switzerland.

“It was interesting to observe that many of the challenges we face are the same across countries. Such trips spur discussions on what we can all do differently to come closer to sustainable healthcare, which is really the aim for every society. The more we can learn from each other and push each other to improve, the better!” – Sarah Lidé, Healthcare Driver Sweden, PwC Sweden.

“Learning together with our clients, gaining fresh perspectives is very valuable. It’s truly a trustful partnership together with our clients. It allows us and our clients to be open-minded and question the status quo.” Philip Sommer, Head Consulting Healthcare, PwC Switzerland.

Last but not least, such trips also enable us to live up to the PwC purpose:

“PwC’s purpose is to build trust in society and solve important problems. To do so, we need to exploit and leverage the full potential of our experience and insights. Such trips enable knowledge sharing between hospitals and healthcare experts in our firm and at the same time strengthen personal relationships.” – Patrick Schwendener, Head Deals Healthcare, PwC Switzerland.

Swiss pension outcomes are falling – could “matching” be part of the answer?

Low, even negative, interest rates and uncertain growth prospects is becoming a “new normal” in Switzerland. The impact on pension fund finances is well documented – pressure on funding levels, tough to find the right investment opportunities and focus on cost transparency. This environment also poses challenges for insured members, and as a result their employers. Expected retirement outcomes have fallen. What does this mean for employees and employers? 

10 years ago an insured person would expect higher returns on any money they invest for retirement than they would today. The mandatory interest credit for Swiss pension plans according to BVG/LPP was 2.50% in 2007 compared to 1.00% today.  Ten-year Swiss government bonds yields have fallen from 2.6% to -0.1% in the same period. This not only affects expected returns on the assets set aside but also the cost of providing an income for life after retirement. Life expectancies for retiring pensioners have increased by about 1 year for females and 2 years for males in that time which also needs to be funded.

All of these factors have had a major impact on retirement outcomes. Based on our calculations, in 2007 a 40 year-old could invest CHF 7’100 and expect a pension of a CHF 1’000 a year for that investment. Today a 40 year-old would expect to have to invest CHF 14’700 – more than doubling of the cost of retirement over 10 years. In that time, inflation expectations have also fallen, but overall the cost of retirement has increased.

What can pension funds do?

Pension funds aim according to our experience to maintain the level of retirement benefits they provide while financing the promises already made. But pension funds are in a “zero-sum” game – without extra funding, members will ultimately receive lower benefits on average when results are not what was expected. Robust analysis and forecasting of what employees can expect to receive, combined with clear communication may be the best what they can do. Other measures are down to employees and employers as recipients and sponsors of retirement benefits.

What does this mean for individuals and employers?

Find higher returns? In conventional collective Swiss plans, employees share in the overall returns of the fund as they are credited to them. This limits opportunities to take more risks, with an expectation of higher returns. For higher earnings, it is possible to have individual strategies through a “1e” pension plan. These plans can be used to seek higher returns, but this may not be suitable for all.

Later retirements? Without saving more, employees have to retire later for the same outcome.  In some ways this is only reasonable: If life expectancies increase without changing retirement ages, the proportion of life we spend in retirement rises. Employers may have to prepare for the ageing effect on their business – not only their workforce recruitment and retention, but possibly their business strategy and target markets.

Employers pay more? One answer may be employers paying more. But employers face economic challenges themselves, with increasing competition and pressure for results. For most companies, raising costs or investing cash may not be palatable.

Employees pay more? Creating more awareness of the individual options available for the employees is one option. Additional voluntary employee contributions are typically deductible for tax purposes. Some employees don’t have confidence in their pension plan and are not keen to lock away money until retirement.

How can companies create further incentives for employees to pay more? A look abroad could help.

Could “matching” be part of the solution?

In the US as well as the UK, contribution “matching” is widely used in pension plan design. Employer contributions are adjusted to “match” those of employees. When an employee contributes a percentage of their salary into the plan, the employer contributes an amount directly linked to what the employee pays. This could be 1:1 – i.e. if the employee pays 2% of pay, employer pays the same. Or some ratio like 2:1 or 1:2.

The big advantages of matching are two-fold: it encourages employees to pay more; and it focuses employer spending where it is most valued by its employees. One of our clients challenged the common Swiss plan option of employers paying the same for all employees, whereas employees can choose their level: “Why can employees choose to pay less, but I cannot follow when they do?” A reasonable question that matching helps to address.

The challenge is that legislation in Switzerland currently restricts the ability to apply matching within the regular plan. The law requires the employer contribution rate to a pension plan to be the same for all employees in the same situation (e.g. age, grade etc). “Matching” can be done through the buy-in system. So with the right plan design, matching can be incorporated within the Swiss plan.

This won’t for every situation as the use of buy-ins is subject to certain caps and restrictions which may become a barrier. Plan administration may be more complex. But in challenging times for pension outcomes, new solutions may be needed.

Contact

Richard Köppel
Pensionskassen-Experte SKPE, People and Organisation
Tel. +41 58 792 11 72
richard.koeppel@ch.pwc.com
Adrian Jones
Director, People and Organisation
Tel. +41 58 792 40 13
adrian.jones@ch.pwc.com

Management of cyber risks for hospitals

Context

The European Union Agency for Network and Information Security (ENISA) is a network of security expertise. It provides assistance to member states of the Union European both in the private and public sectors to increase infrastructure security resilience and compliance with EU legislation.

ENISA has just released a study about the shift for hospitals from the “traditional hospital” model towards a “smart hospital” one. A hospital becomes “smart” when more and more Internet of things (IoT) devices are used and connected to the network in the hospital.

While this new way of working offers undeniable benefits, it also brings new security challenges. As such dependency on IT is increasing ant the risks need to be managed appropriately as do cybersecurity and resilience considerations.

Goal and methodology

The study aims at reviewing the threats and vulnerabilities associated with smart hospitals and upcoming digitalisation. It takes a separate look at the technical and organisational measures that must be set up to reduce these risks to an acceptable level.

To get a global understanding, the process involved the participation of more than 30 security professionals in senior positions from either the hospitals, the health industry, or policy-making agencies. The study summarizes nine main gaps that need to be addressed by hospitals in order to be ready to adapt to IoT devices and move forward in the digital transformation.

 Highlights

 The following conclusions were reached by ENISA:

  1.  The top two threats perceived by respondents are caused by human errors (first) and malicious activities (second). These threats can also cause maximum damage to hospitals (77% for malicious actions and 70% for human errors)
  2. Respondents clearly identified infrastructure as the most critical asset for small hospitals (please refer to chart 1)
  3. Respondents considered that among deployed measures, only few are actually effective and most of these are technical (please refer to chart 2).

hospital study

hospital study2

Conclusion of the ENISA study

Hospitals are not ready for the digital future and smart devices because

  • IT assets are not managed in a central inventory – the study offers a categorisation schema to do so
  • Threats and risks are not assessed and consequently managed – the study offers a taxonomy of threats applicable to smart hospitals
  • Identification of good practice and the gaps in good practice in a hospital are not identified and closed in a timely manner – the study identified nine major gaps which are seen in most hospitals

How PwC can help

The question is no longer whether a hospital can be the target of a cyberattack but when.

Based on our experience, both as auditors and cybersecurity consultants, we have developed an approach which helps to enhance the security stance of hospitals. Our approach comprises the assessment of three aspects: people, processes and technology.

An appropriate level of cybersecurity, compliance and privacy requires a structured approach balancing governance, processes and technology. It includes:

  1. A strategy for how to address cyberthreats, manage risks and establish governance
  2. Identifying the IT assets, the risks and responsible roles in and for the organisation
  3. Protecting IT assets and data appropriately
  4. Detecting cyberattacks, data exfiltration and human errors early and efficiently
  5. Responding effectively to IT security incidents and
  6. Recovering according to defined time objectives to minimize business impact

By the end of the assessment, you will be aware of any gaps with respect to regulatory requirements and of how your security programme lies compared to industry good practices.

strategy hospital

bild health

If you have any questions or remarks, please do not hesitate to contact me.

Pharma & Life Science Hot Topics

Has a health authority prohibited the sale of your pharmaceutical products in Europe, because you are a Swiss established company?

Sale of pharmaceutical products within the EU by non established companies – background

  • Recent developments show that health authorities increase audits and prevent the sale of pharmaceutical products within the EU by companies located outside of the EU, if they do not have a correct wholesaler license in place.
  • Legal basis: The pharmaceutical legislation, Art. 76 of the directive 2001/83EG, the anti-counterfeiting directive 2011/62 and correspondent legal acts implemented in 2015 in different EU member states
  • Consequences/major challenges:
    • Restructuring the current Swiss business model
    • Significant changes in the supply chain
    • Direct and indirect tax implications in Switzerland and in the European Union
    • ERP system and contract adaptions
    • Etc.

Pharma & Life Science Hot Topics: Sale of pharmaceutical products within the EU by non established companies

Key questions
Is your pharmaceutical company established in Switzerland?, Do you sell pharmaceutical (end-) products/drugs in the EU?, Is the wholesaler license used issued on the name of another company than that one that sells the products in the EU?

PwC’s solution
If the answer of all three key questions is yes, we recommend to have your business reviewed and optimized. We have developed a pragmatic solution that works in practice from a regulatory, direct and indirect tax as well as legal perspective –in line with local Swiss and European regulations.

Call for action / Your benefits
We would be pleased to discuss further with you and offer a solution that is perfectly customized to your requirements and needs, in order to ensure a smooth, cost efficient and compliant sale of pharmaceutical products in the EU.

PwC Pharma & Life Science Tax Hot Topics

Download here the publication in PDF version: Pharma & Life Science Tax Hot topics

 

 

Sandra RagazSandra Ragaz
Director, TLS
+41 58 792 44 69
sandra.ragaz@ch.pwc.com

Customs and International Trade

As you may have noticed, some changes will become applicable to the Harmonised System (HS) and subsequently to the Swiss Nomenclature (customs tariff) as well as to the EU Combined Nomenclature (CN) as of 1 January 2017. This includes the classification of pharmaceutical products of chapter 30:

Swiss Nomenclature

Swiss Nomenclature

EU Combined Nomenclature (CN)

EU Combined Nomenclature

Although the import of these products in Switzerland and the EU is still duty free, we recommend to check the classification of your products and makes changes/ amendments where needed. Should you need our assistance with (re)classifying your products, we are of course happy to help you.

PwC Customs & International Trade 2016

 

Download here the publication in PDF version: Customs and International Trade 2016

 

 

 

Sandra RagazSandra Ragaz
Director, TLS
+41 58 792 44 69
sandra.ragaz@ch.pwc.com

ChrisChristina Haas Brunitina Haas Bruni
Senior Manager, TLS
+41 58 792 51 24
christina.haas.bruni@ch.pwc.com

The CIS of the future

Mobile services such as apps for smartphones and increasing integration between systems are fundamentally transforming the healthcare market. Half of all patients already believe that Mobile Health, or mHealth for short, will improve the healthcare system. Physicians, health insurance providers and the pharmaceutical industry also see huge potential in the corresponding healthcare services, but expect that the innovations will take time to be implemented due to security considerations and reservations about data protection. Mobile health services are more than just technical gimmicks: they enable us to prevent future shortages in supply resulting from demographic change. In 2025, 30% of Europeans will be 65 years old or over. The number of chronically ill people is expected to double in the next 20 years. The healthcare market needs to rise to meet these challenges.

Download the full report here.

The Digital Healthcare Leap

New digital health models could help emerging markets leapfrog established markets

Healthcare providers need to embrace digital or risk being left behind

Analysis by PwC on digital health in the emerging markets finds that while traditional digital health models are often too expensive to implement, new more affordable digital healthcare models are disrupting emerging markets which have the potential to give these healthcare systems improved accessibility, safety and quality care.

The digital healthcare Dilemma

Expenditure on healthcare is increasing exponentially in emerging markets (see figure 1). As incomes are rising and the middle class is growing, people are spending more on healthcare and demanding better services. Consumers are no longer passive patients, but have become engaged, with access to new tools and better information. As lifestyles are changing and people are living longer, the emerging markets are witnessing a shift from communicable to chronic disease such as diabetes, cardiovascular diseases and cancer.

Chart_Healthcare

This is causing increasing strain on health systems in the emerging markets, which already face the challenge of underdeveloped infrastructure and an acute shortage of resources.

The shift from traditional to new digital health Solutions

Traditional digital health solutions such as Electronic Health Records (EHR) – which are popular in the developed markets – require a huge up-front cost to purchase, install and maintain. Adoption in the emerging markets has therefore been low.

But new, non-traditional solutions such as cloud-based or open-source EHR can help emerging markets digitise at a fraction of the cost. For best outcomes, other healthcare innovations such as telemedicine, mHealth applications and e-prescriptions will be built around the EHR.

Says David McKeering, Partner, PwC South East Asia Consulting:

“Digital health can dramatically improve an organisation’s productivity and, in turn, provide benefits in both patient outcomes and the bottom line. If the costs can be made affordable, digital health could be an answer to the emerging markets’ challenge to achieve sustainable growth and leapfrog the developed nations to provide quality, affordable, universal and patient-centric care. The good news is that new affordable solutions are coming to the market. And with internet and smartphone penetration growing, the existing technology infrastructure could be used to develop innovative solutions to deliver healthcare services.”

Some examples can already be seen in several emerging markets. The Philippines has implemented an open source electronic medical record system for government health facilities called CHITS. And there is strong support for healthcare cloud systems from both public and private hospitals in Malaysia and the Philippines.

Says David Wijeratne, PwC Growth Markets Centre Leader:

“The benefits of digital healthcare can be felt beyond patients. By assisting the prevention of illness and supporting the provision of care through alternative locations such as clinics, fewer new doctors and nurses will need to be trained and fewer additional beds and hospitals created, which can help to reduce the overall financial healthcare burden on governments in emerging markets, enabling them to fund other key areas of the economy. A whole nation benefits from digital healthcare.”

The challenge for healthcare Providers

‘Digital healthcare’ is not about the technologies, it’s about new ways of solving healthcare problems, creating unique experiences for patients and accelerating healthcare providers’ growth.

One thing is clear: digital is here to stay – and if healthcare providers are not prepared, they may be left behind. Says David McKeering, Partner, PwC South East Asia Consulting:

“Hospitals and healthcare providers that fail to adapt will risk declining revenues as consumers turn elsewhere to have their health needs met. They should look at how they will integrate and connect their existing systems with new digital technologies and merge the data locked inside them to generate meaningful, actionable insights for caregivers. In the new digital health era, digitally-enabled care is no longer going to be a nice-to-have, but rather a fundamental business imperative.”

Developed countries can learn from advancements in digital healthcare in emerging countries. Says Rodolfo Gerber, Partner, PwC Switzerland:

“Trends and experiences in digital healthcare in the emerging countries might give interesting hints and learning points for the healthcare system in developed countries. They can benefit from these learning points, as how to implement robust digital solutions for building an integrated healthcare information chain for all  parties involved.”

To succeed, healthcare providers and administrators need to set strategies that harness technology for mutual interests and mutual gain as they build care delivery models with patients – not patient encounters – at their centre.

The companies that will emerge as winners in this new marketplace will be those that can articulate how technology can add value, align incentives, strategically share and analyse data, and redeploy, extend and expand their workforce to embrace digital enablers.

A copy of the report ‘The Digital Healthcare Leap’ can be downloaded here.

VAT exemption to insurance related services about to change

Recent judgement from the Court of Justice of the European Union is likely to lead to greater focus on insurance related services that have previously been treated as VAT exempt.

 

Summary

The Court of Justice of the European Union confirmed in its recent judgement (Aspiro, C-40/15) that insurance claims handling services should be taxable for VAT purposes. This decision is in line with the current practice and/or rules in a number of member states (e.g. Germany, France), however, it is likely to lead to greater focus on the VAT treatment of insurance related services in countries which, to date, have widely granted VAT exemption to insurance related services (e.g. the UK).

Action recommended

We anticipate that the above decision will trigger a review of the scope of national VAT exemption for insurance related services, especially in countries which apply VAT exemption more broadly. Insurers and their suppliers should carefully review their service arrangements and assess the impact of the potential changes – such as potential for higher VAT costs for insurers as well as opportunities to maximise input VAT recovery for suppliers. It may be possible to consider claims handling services as VAT exempt if they are provided as part of single supply together with insurance intermediation (Aspiro did not deal with this matter explicitly).

The Aspiro case

Aspiro provided claim handling services (i.e. receiving and processing of claims and losses covered by insurance, contacting the insured person to conduct inspections to determine the causes and circumstances of an accident, preparing expert loss reports, dealing with appeals and complaints regarding claim handling and administrative and technical tasks related to these activities). Aspiro had a legal relationship with the insurer who engaged them to provide services in the name and on behalf of the insurer, i.e. Aspiro did not have any contractual relationship with the insured persons, however dealt directly with them. Aspiro considered its activities to be VAT exempt insurance services on the grounds that they are a key element of the business for the insurance company.

VAT exemption – what’s in / what’s out

Using the Aspiro example – the court considered two routes to VAT exemption; 1) services which are part of an insurance service, and 2) insurance related services typically performed by insurance agents and/or brokers. It concluded that the services provided by Aspiro did not represent either of the services leading to VAT exemption as Aspiro did not have a contractual relationship with the insured person (key condition for characterisation as an insurance service) nor undertook the role of finding prospective clients to introduce them to the insured with a view to concluding an insurance contract (key condition for characterisation as an insurance related service).

 

Please contact one of our authors if you have any questions about this matter:

Immy Pandor
Dieter Wirth
Marcella Dzienisik
Tobias Meier