Healthcare Market: 14 Percent of GDP to be Redistributed
Between 1996 and 2010, Germany’s health care expenditure rose from 195 to 270 billion euros, amounting to approximately eleven percent of the country’s gross domestic product (GDP). It has been growing faster than the national economy as a whole, and will continue to do so for years to come.
Not included in those numbers is the secondary healthcare market which has emerged in response to the increasing demand for products and services excluded by health insurers such as supplementary medical treatment, alternative medicine or fitness training and equipment. Analysts have estimated its volume at around 65 billion euros.
The primary and secondary healthcare markets‘ GDP contributions add up to 14 percent. In other words, about one seventh of Germany’s total economic output will be redistributed over the next few years due to the structural changes which both markets are currently undergoing.
Drivers of Change
On both the primary and the secondary healthcare market, the shift of payment flows is driven by four key factors:
1) Innovation
Advances in technology have facilitated new therapies, business models and processes, some of which dramatically impact costs and earnings. Players in the healthcare arena hence need to identify and implement innovations that have the potential to boost quality and cut costs at the same time.
2) Investment Backlog
According to a study conducted by Spectaris, an association of German midsized high-tech companies, investment in inpatient care alone has fallen some 50 billion euros short of actual requirements. Underfunding goes at the expense of both quality and efficiency. As hardly any other industry, the healthcare system will need to implement efficient solutions to generate net income from high-quality services.
3) Supply-Side Changes
Legislative measures to control costs such as shifting the financial burden from the public sector to the individual, or the redirection of funds from in- to outpatient care have triggered radical changes in some segments of the healthcare market. To prepare themselves for such alterations, providers must keep tabs on their liquidity and raise external funds in time as needed.
4) Changes in Demand
Health-related subjects such as fitness and alternative medicine are booming. As patients become clients, they are more willing to invest in products and services not covered by their medical insurance schemes. In return, however, they expect first-class treatment and excellent results.
Seizing Opportunities
To seize the opportunities resulting from the structural change of Germany’s healthcare system, market players need to ask new questions and answer old ones differently, prioritizing three fields of action:
- Economization. Healthcare players will have to redefine success criteria such as effectiveness and efficiency, and initiate a process of continuous improvement.
- B2B Cooperation. Many companies tend to rely on internal resources to solve business problems. Often, though, cooperative approaches like product development partnerships, business process outsourcing, collective purchasing or investment models add value by tapping efficiency reserves and paving the way into new market segments.
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Liquidity Management, Funding. This includes tasks such as::
- maintaining liquidity buffers
- development of sustainable funding solutions for procurement, outsourcing, mergers and acquisitions, projects, and business - process reengineering
- leveraging sales through external financing
- marketing (optimization of effectiveness, target-group strategies, …)
- management of physical assets (software, hardware, consumables, …)
Consileon Healthcare Management
Consileon Healthcare Management combines many years of experience in the financial services industry with in-depth knowledge of the German healthcare system into individual, innovative, sustainable solutions. Specializing in B2B cooperation, finance, marketing, sales, outsourcing as well as mergers and acquisitions, we are ready to be judged by the value we add to your business.
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