Value-based compensation on the advance in the healthcare segment

Classic reimbursement concepts are a heavy drag on the healthcare systems
In the classic reimbursement systems in the healthcare sector, service providers such as the health insurance companies by and large pay for the services rendered by the healthcare service providers independently of whether the treatment was successful or the treatment was conducted in as efficient a manner as possible in terms of costs. In this way, essentially incentives were created for the healthcare service providers to conduct as many treatments, and as many expensive treatments, as possible. In numerous industrialised nations, as a result of the structure of these reimbursement systems as well as macroeconomic and demographic factors, the healthcare systems have for years now increasingly been coming up against their financial limits.

Value-based remuneration as the new concept
For this reason, the trend now favours new forms of reimbursement for healthcare service providers. These new forms are no longer geared to the volume of services rendered, but above all to whether the treatment has added value. The added value is defined on the one hand by the long-term successful healing of the patient and, on the other, by cost-efficient service delivery, whereby the two aspects are in part at loggerheads.

Companies well positioned for the system switch
Fundamentally, value-based compensation means that financial risks are transferred from those reimbursing the services to those rendering them and their subcontractors, essentially increasing the pressure on costs. We have examined the impact on companies and have limited ourselves to corporations that in our opinion are most affected by this in our sector. The German companies are Fresenius, Fresenius Medical Care, Siemens Healthineers, Drägerwerk and Qiagen. Of the firms included in our international coverage we have assessed General Electric, Johnson & Johnson, Medtronic, Philips and Roche. Overall, we are of the opinion that these companies are well positioned to cope with value-based compensation. The main reasons are the consistently strong market positions of these companies and associated strong economies of scale they can achieve. Moreover, almost all the corporations, including the German ones amongst them, have a very strong position in the world’s largest healthcare market, that of the US, where value-based compensation systems are already widespread. In our view, this experience can be brought to bear profitably in other regions, too.

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