INTRODUCTION

Canada has a history of finding solutions to big problems — from inventing the first working telephone and discovering insulin, to building the first cardiac pacemaker. In the 1960s, inspired by the launch of universal healthcare in Europe, Tommy Douglas drove the adoption of Medicare so that Canadians wouldn’t go bankrupt because of healthcare costs, which, decades later, remains a tremendous source of national pride.

Today, the analog telephone has evolved into the smartphone, which has more technology than that used to get humans to the moon[i]. Insulin can be delivered by hybrid closed-loop integrated insulin pump systems today versus the inconvenience of multiple daily injections. Cardiac pacemakers have evolved from large boxes plugged into walls to becoming implantable, battery-powered, and as small as a Tic Tac. But our healthcare system has struggled to innovate — it is still focused on reimbursing acute episodes of care in a hospital setting, with primary care delivered almost exclusively by physicians on a fee-for-service basis. That’s not to say that Canadians have not developed innovative healthcare policies (for example, the Lalonde Report of 1974 or the Naylor Report of 2015), processes, or technologies; it’s just that these innovations are not being widely or consistently adopted here and we are not reaping the potential clinical and cost effectiveness  outcomes.

Instead, governments have created “process theatre”, a concept described by Steve Blank in Harvard Business Review:

“…government agencies have realized that the processes and metrics they put in place to optimize execution (Procurement, Personnel, Security, Legal, etc.) are obstacles for innovation. Efforts to reform and recast these are well meaning, but without an overall innovation strategy, it’s like building sandcastles on the beach. The result is process theatre.”[ii]

The consequences of ‘process theatre’ in healthcare are trifold: our healthcare performance has suffered (as outlined in the 2015 Naylor Report[iii]); Canadians have limited or suboptimal access to some treatments that are closer to standard of care in other countries (such as the use of neuromodulation, transcatheter aortic valve replacement, or robotic assisted surgery[iv]); and our healthcare sector struggles to attract investment at home.

Our healthcare system performance currently sits in the bottom quartile of international rankings, such as those published by The Commonwealth Fund (2017). Canada lags behind other countries in several key areas, including access (10th of 11 countries), equity, efficiency, and health outcomes.[v] The Fraser Institute’s 2019 report comparing the performance of 28 countries with universal (or near-universal) healthcare in terms of cost and outcomes concluded that “although Canada is among the most expensive universal-access health-care systems in the OECD, its performance is modest to poor.”  And when it comes to health innovation, Canada ranks 12th of 16 peer countries, behind Sweden, Switzerland, Denmark, the United States, and Finland.[vi]

So, what’s holding back healthcare innovation in Canada?

For one, our innovation policies are primarily focused on the supply of innovation, (for example, through economic development, such as creating superclusters) which has produced a big talent pool of people who do great research in Canada. On the flip side, there has been almost no focus on policies that address the demand for the innovations stemming from that talent pool and research. Worse, our “process theatre” is making the little demand there is for innovations difficult to fulfill because we have failed to prepare the Canadian market to adopt innovations at scale and with a focus on sustainability[vii]. As a result, the country’s innovation potential has not been realized. [viii]

Demand-side innovation policies are defined as “all public measures to induce innovations and/or speed up diffusion of innovations through increasing the demand for innovations, defining new functional requirement for products and services or better articulating demand.”[ix]  They stimulate growth by recognizing the feedback-link between supply and demand in the innovation process[x] and matching the innovative solutions that governments need to help solve big problems — like addressing the growing need for costly healthcare services — with the economic investment innovators require.

Jakob Edler, Executive Director of the Fraunhofer Institute for Systems and Innovation Research, sums up Canada’s problem well:

“A science, technology and innovation (STI) policy that keeps focusing primarily on strengthening the supply side but leaves the demand to ‘market forces’ will limp toward better innovation performance for the economy and society rather than forcefully taking on the economic and societal challenges ahead”.[xi]

Canadian healthcare is limping badly right now.

That’s why we need to focus on demand-side innovative policies that make it easier for the public sector to ask for innovative solutions to help solve societal issues, encourage them to adopt these solutions, and make the process of innovation procurement and adoption much easier.

The federal government decided to focus on the economic development opportunity in healthcare when it launched the Health and Biosciences Economic Strategy Table (HBEST) in 2017.  The HBEST panel had five recommendations — three of which were supply side policy recommendations around IT, human resources, and capital; and two demand-side innovation health policies relating to procurement and regulations.

To accelerate innovation adoption, the panel recommended  employing value-based procurement principles. This could be accomplished by:

1. Working with the provinces and territories on a joint effort to implement tools for the adoption of value-based procurement (VBP) principles
2. Applying VBP principles for healthcare services delivered by the federal government
3. Developing or adapting a current federal agency to have a joint health and economic development mandate, similar to the UK’s NHS Innovation Accelerator

While a lot remains to be done to implement VBP principles, the federal government did announce  $20 million in funding to scale up Canadian companies through the creation of a CAN Health Network — an integrated market that makes it easier for a Canadian company to sell to multiple hospitals within the Network. Unfortunately, this is essentially a Band-Aid solution that does not tackle the fundamentals of an effective demand-side innovation strategy.

Provincial governments have had various starts and stops regarding their own demand-side innovation policies, including the now defunct Ontario Chief Innovation Strategist’s Office, the Quebec Innovation Strategist’s Office, and the Alberta Strategic Clinical Networks (SCNs), which can only propose solutions and have no tools or authority to implement their recommendations or implement demand-side strategies.

Provinces across the country should be inspired by the recent (November 9, 2019) changes to regulations in Germany designed to improve adoption of digital health tools and processes. Some highlights include: allowing doctors to prescribe medical apps; allowing doctors to promote telehealth services (with fee codes for providing the service); and allocating € 200 million annually to fund innovative healthcare projects.[xii]  Less than a week after the German announcement, Ontario announced its own strategy for improving access to digital and virtual health, including more access to video visits with a doctor and better patient and healthcare provider access to health records.[xiii]

Whether it’s for digital health or otherwise, current Canadian federal and provincial governments need to evaluate the outcomes they want to achieve in healthcare; work with innovators to achieve those desired outcomes; and ensure health policies support adoption — rather than impede access — to those innovations. There are three key issues with current policies that impede healthcare innovation in Canada: funding mechanisms, procurement, and reimbursement.  

FUNDING 

Fee-For Service Payment Systems

Canadian physicians continue to be remunerated predominantly by fee-for-service (FFS) payment models; in 2016, approximately 72% of all fees paid to physicians in Canada were under FFS[xiv]. By rewarding volume of services rather than value, these payment models discourage the adoption of innovative technologies, workforce modernization, and more complete care coordination that could lower delivery costs while improving patient outcomes.  

There is no question that doctors should be appropriately remunerated for what they do. The issue is not how much they are paid, but rather what they are paid for, in terms of their scope of practice and ensuring they are incentivized to produce outcomes, not complete tasks. Many countries are moving away from the FFS payment model in favour of other value-based physician payment models, which tie payment to the achievement of specific goals related patient outcomes, costs, and/or quality.[xv] In Ontario, blended capitation models have emerged, where physicians have some form of capitated payments for a population of patients.  There is some evidence that these new funding models can reduce unnecessary (low-value) care, but the details around the level of incentives and risk being borne by physicians needs to be carefully considered.[xvi],[xvii]

The United Kingdom has a salary payment model for family physicians, who have wage parity with specialists and referral ownership. Not coincidentally, one of the reasons the United Kingdom was ranked number one in the 2017 Commonwealth Fund survey was the strength of its primary care system. In the same survey, Canada came dead last—11th out of 11 countries—in timeliness of access to primary care. 

Fee Codes

The problem with FFS payment models is that rather than incentivizing the creation of healthier populations, they incentivize providing services over patient outcomes.[xviii]  For example, in Ontario the Ontario Health Insurance Plan (OHIP) fee codes can become out of date quickly.  Canadian jurisdictions do have mechanisms through their respective health technology assessment (HTA) organizations to review emerging technologies that are both clinically and economically beneficial versus the current standard of care.  However, there is no direct link between HTA reviews and the creation of a corresponding OHIP code.  Similarly, and just as important to the adoption of new processes and innovations, the same issue applies as new evidence emerges the recommends delisting services that are of low-value or are simply no longer supported by evidence.  Understandably, physicians in Canada who are locked into fee schedules tend to only provide services they can be paid for.  Consequently, many patients in Canada are not receiving the most appropriate therapies since their care providers are unable to receive renumeration in a FFS environment. 

This has a significant impact on the adoption of innovative technologies and services if there is no rapid mechanism for creating new fee codes.  The simplest example is the fact that most doctors don’t have a fee code for consults over the phone, which not only means their patients are forced to travel to visit a doctor in person, it also means digital health innovations have limited adoption in Canada. 

Another example is the experience of Ontario-based BresoTec, which invented a sleep apnea device for patients to use at home as a convenient alternative to spending the night at a sleep lab. BresoTec has had difficulty selling into the Canadian market because doctors are paid for sending a patient to a sleep lab (activity), not for diagnosing a sleep disorder efficiently (outcome) and there is no fee code for recommending the device. It’s not hard to imagine that, given the choice, a patient would prefer doing the test at home. 

PureWeb (formerly Calgary Scientific) in Alberta ran into similar problems after it developed a remote radiology service that allows medical images to be shared over the cloud with a radiologist who provides a diagnosis. Once again, this service is not on provincial fee schedules, so it has had challenges making inroads in Canada. 

Of note, both companies have done well exporting their technologies to other countries. It is a further Canadian irony that the two companies received financial support from their provincial governments to help them get started — thanks to supply side innovation policies —  but their healthcare systems were challenged to buy their products once they were commercially available because of a lack of demand-side innovation policies. More importantly, it has meant that Canadians are not benefitting from these locally developed (or home-grown) innovations.

WORKFORCE MODERNIZATION

In Canada, FFS payments are coming under greater scrutiny. A recent blue-ribbon report by a panel on Alberta’s finances recommended the province reduce its budget deficit by introducing more alternative payment plans for physicians to replace FFS billing, and by using less costly health professionals, like nurse-practitioners. [xix] It highlighted that Ontario and British Columbia are ahead of Alberta in terms of modernizing their healthcare systems by adopting alternative payment models and leveraging non-hospital alternatives to care.  These pockets of health delivery innovation, however, are not widespread.   

In his book, “Human: Solving the Global Workforce Crisis in Healthcare,” KPMG researcher and author Mark Britnell makes the case that governments and healthcare employers need to better support health professionals to practice at the upper limits of their clinical licence, encouraged by regulators, as a way to address constraints on both workforce availability and cost.

Many health organizations and systems are still stuck in the mindset of thinking about personnel issues. Instead, we need a fundamental reset of approach to ensure a relentless focus on human resources. Hospital and health system governing boards should— at the very least— give ‘people’ the same priority as ‘finance.’.[xx]

Several hospitals in India have used extreme prioritization of human capital as a way to deliver excellent care while keeping costs low. In the book “Reverse Innovation in Healthcare: How to Make Value-based Delivery Work” the authors point out that by having nurses, junior surgeons, and paramedical staff take on routine tasks, the best Indian hospitals are ensuring the most expensive healthcare professionals are operating at the upper limits of their scope of practice.[xxi] For example, during routine cardiac surgery at Narayana hospitals in India, the junior surgeon opens the chest and harvests a vein, while the senior surgeon only does the most challenging part of the surgery, before moving on to the next patient. Pre- and postop tests are performed by paramedical staff, and in some hospitals, families are trained to monitor patients post-ICU. 

If we do not modernize our healthcare workforce, we run the risk of burning out the remaining two-thirds of physicians and nurses who are already suffering from high levels of work-related stress, emotional trauma, or exhaustion.[xxii]

HOSPITAL FUNDING 

Compounding the problem of limited access, the global budgets through which most Canadian hospitals are funded are usually fully allocated  by the time they are approved each year, providing little or no opportunity to invest in new technology or processes that would improve outcomes or save money over the longer term. 

The issue is further exacerbated by the how fragmented or siloed the budgets are.  For example, if a device can help ischemic stroke victims be discharged from the hospital in two days instead of several weeks, the radiology suite pays for the device, but the emergency room or rehabilitation department reaps the savings. That makes it challenging for the emergency department to adopt the innovation, even if the outcome is better for the stroke patient.

In his January 2019 article for Rotman Management Magazine, “Fighting Fragmentation in Healthcare: A Modest Proposal”, Will Mitchell argues that the core challenge in healthcare is not a lack of funding, commitment or individual skill, but high levels of fragmentation. 

“With at least moderate overlap of incentives for innovation, cost sharing, lifecycle benefits, and other patient and system needs, we would unquestionably have stronger healthcare … The central problem is that those who must pay for products and services that will provide systemic gains in costs and quality often do not reap the benefits, and as a result, they often do not make systemic choices.”[xxiii]

If doctors are incentivized for tasks instead of outcomes, and department budgets are allocated in silos, then no one is incentivized to have less expensive healthcare providers or to adopt innovations that might cost more in one department but result in overall savings for the hospital or health system. 

In the United States, the creation of Accountable Care Organizations (ACOs) has started to deliver healthcare based on the premise of re-incentivizing healthcare delivery to focus on outcomes. As defined by the North American Observatory on Health Systems and Policies: 

“ACOs include groups of doctors, hospitals, and other healthcare providers, who voluntarily come together to deliver and coordinate high quality care to the patients they serve. They broadly aim to achieve better coordinated and integrated care by aligning incentives among providers and payers.”[xxiv]

This way of thinking about healthcare delivery works to refocus constrained healthcare resources on delivering the best care for patients and, most importantly, on delivering better healthcare results.

PROCUREMENT POLICIES

Public procurement is a key tool in the demand-side innovation policy toolbox. Canada’s lack of agility in healthcare is also closely tied to ineffective hospital procurement policies.  These policies were developed with good intentions — standardization and cost savings — but can be counterproductive to acquiring the short- and long-term clinical and economic benefits of new treatments, services, and technologies.

Procurement teams too often focus almost exclusively on the lowest up-front prices for products and services, even if a device or service that may be more costly in the short term could ultimately produce greater savings and better patient outcomes in the long term. It becomes a spreadsheet exercise of picking the lowest sticker price instead of trying to understand overall value to the system. 

As a result, our “bulk-buy” procurement processes thwart innovation and weaken healthcare performance, with little accountability for operational efficiency and patient outcomes.

It doesn’t help that procurement offices and staff are often disconnected from clinical teams — typically located off-site or down in the hospital basement separated from the actual delivery of care — which makes it more difficult for them to understand how their decisions affect clinical outcomes. We need procurement professionals, clinicians, and innovators working together seamlessly to tackle healthcare challenges.

We could also learn from European and broad private sector procurement, which long ago embraced new methodologies for value-based procurement. According to McKinsey, the United Kingdom and Sweden are early adopters, while Germany, France, the Netherlands, and Spain are fast followers of innovative procurement.[xxv]

Denmark is another example of a country leveraging demand-side innovation policies to benefit both patient outcomes and economic development.  It has shifted to value-based procurement models in recent years so that purchasers are required to consider the quality, innovation, durability, and life cycle of a product.[xxvi]

At the International Roundtable in Copenhagen focused on procurement in February 2019, Lars Dahl Allerup, new business development manager at the Capital Region of Denmark, shared their next-generation public procurement strategy.  There were two particularly notable demand-side innovation policies presented. The first was Denmark’s Copenhagen Value-based Procurement Model, which is a next-generation model still in development.  The model is considering three sources of value:

• improved productivity,
• a reduction in the consumption of other healthcare services, and
• improved patient outcomes. 

The second was a roadmap for using strategic procurement to spur investments, market access, and cross-border collaboration, while also focusing on patient outcomes and time/cost savings. 

With this kind of innovative thinking and a focus on leveraging demand-side innovation policies to improve health and economic outcomes, it is no surprise then that although Denmark is less than a sixth of Canada’s size in terms of population, it is home base to several large multinational companies in the health field including Novo Nordisk, Coloplast, and Leo Pharma, as well as another 1,500 smaller life science companies.

Although a one-off, a standout example of value-based procurement in Canada, is Ontario’s Southlake Regional Health Centre. It recognized the relationship between procurement and innovation and leveraged competitive dialogue to procure key performance measures, instead of just products. Rather than focusing solely on price, the hospital considered:

• The value of a product or service beyond price;
• Patient outcomes, such as faster recovery time or reduced risk of rehospitalization;
• Device life cycle and longevity; and
• The most appropriate product or service for each individual patient.

The results of this new approach to procurement have been encouraging. Because of the anticipated savings from operational improvements (which was part of its RFP), Southlake could reallocate funds to finance the latest in treatment options. Better access to the most advanced medical technology is expected to, in turn, lead to better patient outcomes. 

Southlake remains the exception, however, and Canada needs more government-led procurement innovation so that more hospitals can engage in value-based procurement.

REIMBURSEMENT POLICIES

A final obstacle that needs to be addressed to spur innovation is the long and complicated process for obtaining reimbursement for new technologies. It can take a couple of years for review teams to determine whether a new device should qualify for reimbursement, based on an HTA requested by the government or a hospital. Unlike in the United Kingdom or the United States, however, even when technologies do receive a positive recommendation in Canada, there is no guarantee of funding or adoption. This provides no incentive for innovative companies to introduce new technologies to the Canadian market and limits patient access to care that could improve outcomes.  Examples abound, including insufficient funding for deep brain stimulation and transcatheter aortic valve replacement (TAVR),[xxvii] despite positive HTA reviews.

Another example of a product that received a positive HTA recommendation but has no funding from any provincial government is continuous glucose monitors (CGM) for people with Type 1 diabetes. Improperly managed diabetes can lead to blindness, amputations, heart disease and kidney disease, which also carry large costs to the system. Much of the expense of long-term complications and the short-term hospital visits associated with hypoglycemic events could be avoided through innovative CGMs integrated with insulin pumps, but because the short-term costs for these devices may be higher than multiple daily injections, they aren’t fully reimbursed by provincial governments.

Unlike CGMs, insulin pumps have some funding, but once reimbursed. there is no further monitoring of the insulin pump, its impact on health outcomes, or the improvement to the patient’s life. Whether the device delivers the outcomes desired for the patient (and the health system) or not the provider is paid. An innovative reimbursement policy could tie outcomes to the level of reimbursement being provided. 

Health innovations can only begin to solve our greatest healthcare challenges and contribute to economic productivity if they are absorbed by the public sector.[xxviii] And to encourage and attract innovators to Canada we need to enable policy that incentivizes innovation adoption, accelerates its diffusion, and provides reimbursement.

CONCLUSION

The barriers to health innovation in Canada may be daunting, but they don’t have to be permanent. All major players in the health system — including government payors, health professionals, healthcare institutions, and industry — have critical roles to play in reform, which will require creativity, trust and new ways of working together 

Going back to Will Mitchell’s article, Fighting Fragmentation in Healthcare: A Modest Proposal, the author touched on the pressing need for greater collaboration.

“Bringing vendors into the mix as key partners in creating patient and system value may appear controversial. But if we do not do so, we are leaving important knowledge on the floor and missing opportunities for improvement. By contrast, if vendors do engage more actively as value chain partners, we gain important disruptive benefits.”

If we can begin by accepting that everyone, including innovators, shares the same fundamental objective of value-based healthcare, to improve patient outcomes and reduce costs,  and  start dismantling the structural barriers, we can then also address  the availability of our precious human resources.

The overall effort must be enabled by governments, because only they can make the architectural changes required to remove structural barriers. Governments in Canada need to move ahead with demand-side innovation policies that will help spur Canadian demand for innovative solutions to some of our biggest health challenges. They can begin to do this by:

1. Increasing the public sector’s ability to absorb innovation;
2. Calling for innovative solutions to help solve societal issues;
3. Encouraging consumers and institutions to adopt the innovations that can help respond to societal issues;
4. Fostering user-driven innovation that responds to market needs on both the production and consumption sides.

There is an appetite for change in Canada and a recognition that our current innovation policy agenda, with its supply side focus, isn’t working. Canada has a wealth of expertise, knowledge and technical skills. We need to optimize these skills to increase innovation adoption in Canada for the Canadian public healthcare market. By doing this we can solve Canadian healthcare challenges and increase economic productivity — and in the process, regain our footing as a world healthcare leader, together.