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HEALTH CARE: CHALLANGES FOR SMEs

Guest post by: Norbert Knoll von Dornhoff

Article Overview: THE CONTRIBUTION OF SMEs TO AN EFFICIENT ALLOCATION OF HEALTH CARE EXPENDITURES. The future of health care, particularly in less privileged regions of the world, is presently one of the most challenging issues for national and international public politics. The global economic crisis of 2008 has strongly fuelled the debate about control of heath care expenditure and it’s financing.

HEALTH CARE: CHALLANGES FOR SMEs

Among the various economic policy options here, those geared to attaining higher levels of efficiency in the provision of health services are particularly appropriate, and less politically controversial. This is because, by definition, they would contribute to containing public spending (using fewer resources) while maintaining the same output and quality of the services. The alternatives that may give rise to improved efficiency in the provision of healthc

The alternatives that may give rise to improved efficiency in the provision of healthcare services are potentially very diverse. Among them, the existing literature emphasizes the role played by health policies and institutions, including aspects such as the degree of public coverage, its financing, the public or private nature of the provision of healthcare services or the administrative or territorial organisation of the system.

While we discovered in recent publications a plethora of recommendations for improving the efficiency of public spending, the important role of the private sector, particularly of the millions of Small and Medium Enterprises (SMEs) that are world wide engaged in various forms of heath care, has up to date been barely analyzed and is still waiting for thorough considerations and practical actions.

This article attempts to inform in brevity SME Supporting Associations about the dimension and scope of heath care expenditures and possible actions to improve efficiency of allocation by stronger and coordinated integration of SMEs in national and international heath care systems.

The dimension of health care expenditures

As of 2010 the WHO (World Health Organization) estimated the total global expenditure for health at more than US$ 4.1 trillion. The Country with highest total spending per person per year on health are the United States (US$ 6103), the Country with lowest total spending per person per year on health is Burundi (US$ 2.90), the Country with highest government spending per person per year on health: Norway (US$ 4508), the Country with lowest government spending per person per year on health is Burundi (US$ 0.70), the Country with highest annual out-of-pocket household spending on health is Switzerland (US$ 1787), the Country with lowest annual out-of-pocket household spending on health are the Solomon Islands (US$ 1.00).

As a consequence of the trend of increasing demand of health care services and supply factors related with the impact of technological change (IMF 2010), health care expenditure in recent decades has grown very significantly in most countries from 6% of GDP in 1970 to around 14% of GDP in 2010. This trend might continue in the future and even become more significant due among other reasons to the population ageing. Apart from Luxembourg, health spending grew more quickly than GDP since 2000 resulting in a higher share of GDP allocated to health. In 2009, OECD countries devoted 9.6% of their GDP to health spending, a sharp increase from 8.8% in 2008, following the recession that started in many countries in 2008 and became widespread in 2009. The rise in the health spending share of GDP was particularly marked in Ireland, where the percentage of GDP devoted to health increased from 7.7% in 2007 to 9.5% in 2009, and in the United Kingdom, where it rose from 8.4% in 2007 to 9.8% in 2009.

The fast-growing economies of China and India spent on health 4.6% and 4.2% of their GDP respectively in 2009, while South Africa and Brazil allocated 8.5% and 9.0% of GDP to health. The share of public expenditure on health to GDP also varies among OECD countries from a high of 9.8% in Denmark to a low of 3.1% in Mexico.

Since 2000, after an initial period of growth in the health spending to GDP ratio, there was a period of relative stability until 2009. The subsequent reduction in GDP, due to the economic downturn, has led to rises in the health spending to GDP ratios. Previous recessions show that, in many countries, the health spending share of GDP has tended to go up strongly during periods of economic downturn, and then stabilise or go down only slightly during periods of economic growth.

Health Care and SMEs: Big Challenges in the future

“The contribution of health to economic development is considered to be high. Studies that have been made in the UK show that 30% of economic growth can be related to improved health and some scientists believe that the improved health of the population has a greater impact on the economic growth than education. It is estimated that today about 30-40% of the value making is due to improved health. Comparisons between countries has shown that if age increases by one year it is equivalent to 4% growth in GDP and in countries where incomes are high 10% fewer deaths from cardiovascular disease led to a 1% increase in GDP.”, wrote Dr. Örn Thorvardarson, one of the leading health economists of Iceland, Reykjavik, in his article “HEALTH AND ECONOMY” of 2011.

According to Espicom’s June 2010 report1 „The global market for medical equipment and supplies is valued at US$245.6 billion in 2010, equal to just over US$44 per capita. The CAGR (Compound Annual Growth Rate) for the 2006-2010 periods is 5.3%, although this masks the major reduction in growth which has occurred in 2009 and 2010.”

The Georgia State University in a study of 2009 estimated that since the end of World War II more than 50% of all innovations and even 95% of all „radical” innovations , e.g. in electronics, medicine techniques and genetic engineering originated from single inventors and SMEs. Recent publications, more specifically focussing on the medical device industry, confirmed that most novel technologies are a central part of the solutions offered by SMEs rather that by multinationals. A survey of 12 National Industry Associations (including all the major medical technology exporters) across Europe has identified almost 7,000 SMEs that design and manufacture medical devices and diagnostic products. Of these: 3702 companies employ fewer than 10 employees (micro), 1940 companies employ 10–50 employees (small), 1187 companies employ 50–250 employees (medium).

Regarding new products in the biotech, SMEs traditionally play a crucial role. Because of their quick adaptability, ability to identify market niches and considerable innovative potential, these firms form an important component of the healthcare industry worldwide. Accounting for more than 50% of all pipeline products, they have a significant role in the future of the healthcare industry. Analysis of more than 4,000 products in the pipeline reveals that 56% are being developed by small businesses.

Conclusion and recommendations for actions

• At national level, Member States need to improve the business environment, especially for innovative SMEs. This includes public sector procurement initiatives to promote innovation incentives, enhancing the conditions for greater enforcement intellectual property rights, and reducing the administrative burden on companies.

• If purchasing procedures are more predictable, SMEs can make better informed assessments of the risks they face in doing business. The ability to correctly interpret this environment is what allows a business to assess its competitiveness and provides the premise on which it will operate successfully.

• SME-relevant research: Promoting innovation by strengthening the links between Academia and industry is the driving force of this work programme. Broad, SME-targeted topics (almost 50 % of all topics) are set out in areas of great interest to SMEs, such as medical technologies, and where, for each project, a minimum of 15%, 30% or 50% of national and international (WHO, EU, IFC – World Bank etc) funding must go to SMEs. SMEs are encouraged via specific conditions for several topics to take a leading role in projects to foster innovation in health research.

• WUSME The World Union of Small and Medium Enterprises shall encourage its SMEs – supporting Member Associations to take stock of the number and scope of SMEs involved in heath care services in their region and elaborate projects ready for funding by the International Organizations.

Regional SMEs – supporting Associations with the assistance of WUSME shall urge the Governments in their region to introduce the „Currency Transaction Levy” („Tobin Tax”). Part of the proceeds whereof shall be used for crises prevention, improvement of the business environment of SMEs and for the enhancement of the competitiveness of health-related industries and businesses, as well as for the funding of global health issues in accordance with the UN Millennium Goals.

________________________________________

References:

Wikipedia, List of countries by total health expenditure (PPP) per capita

Eucomed, Medical Technology, Position Paper, 2011,

THE SYNERGY BETWEEN HEALTH EXPENDITURE AND

ECONOMY, SANDA DURA1, H. DURA2, Lucian Blaga” University of Sibiu, 2010

BMC Public Health, Promoting mental health in small-medium enterprises: An evaluation of the "Business in Mind", Angela Martin, Kristy Sanderson, Jenn Scott and Paula Brough, 2009

Michael Byrne, Financing medical equipment, 2011

E. Colombatto, IS THERE A HEALTH-CARE PROBLEM IN WESTERN SOCIETIES? Working Paper No.14/2011

Stephanie Ditta, Health expenditure around the world, 2010

Weak Economy Curbs Health Spending, The WALL STREET JOURNAL, 1/ 2012,

UK: Government opens up to SMEs, The Cabinet Office has announced a package of measures to give small firms, charities and voluntary organisations a better chance of winning government business

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Article Tags: dimension, efficiency, expenditures, health care, sms, wusme



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Re: Women and Financing - It's Difficult! - I found this paragraph of interest (in the article from Nana's link: [quote="Nana":3r7womqv]Other studies show that women operate more service and retail establishments than men, which might explain their difficulty in getting financing since financial institutions often consider these two sectors more risky. However, although women are generally less inclined than men to apply for financing, when they do, they are more likely to get it. According to a study by Industry Canada on SME financing in Canada, in 2000 majority female-owned SMEs obtained a loan approval rate of 82%, which is slightly higher than the approval rate for majority male-owned businesses (80%). This suggests that when they do apply for financing, businesswomen submit excellent applications. [/quote:3r7womqv] They say, "Women are more likely to get [financing]." But the difference is only 2 percentage points! Big deal! And, that was only for one year, 2000. I'd like to know what the 10-year average is. Numbers can be manipulated to mean anything you want them to mean...it all depends on what you want to show.


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