HealthJune 16, 2023

Addressing healthcare costs of an aging population through digital transformation

By adopting digital transformation solutions that meets your older patients’ needs, you can reduce costs and simultaneously improve the outcomes and lives of aging populations.

As healthcare leaders continue to face budgetary challenges, they’re also working hard to meet the needs of an expanding aging population while simultaneously controlling healthcare costs.

It’s a challenge that’s compounded by the fact that our aging populations are defined by chronic conditions. According to the National Council on Aging (NCOA), around 95% percent of patients age 65 or older have a minimum of one chronic condition, and 80% have two or more.

As humans live longer, the costs associated with these statistics become even more significant. Alzheimer’s and dementia cost around $49,000 per person per year in treatment and lost wages, says the NCOA, while diabetes costs around $20,000. And as healthcare leaders face rising healthcare costs, keeping aging populations healthy and happy has only gotten more difficult.

But despite these challenges, it is possible to address the needs of older populations in financially sustainable ways that allow patients to access the best care everywhere — even as they continue to age.

Caring for an expanding aging population

People are living longer today than ever before, and the rate of population aging continues to increase, as well. Because of this phenomenon, healthcare costs of aging populations are likewise ballooning, further complicating the challenge of providing financially sustainable healthcare to the planet’s elder generations.

In the United States, for example, people over 55 make up 56% of total health spending, but they’re only 30% of the population. Chronic disease is a key cost driver. And the NCOA reports that patients with multiple chronic diseases make up two-thirds of healthcare costs and a full 93% of Medicare spending.

Long-term care, specifically in countries recognized by the Organization for Economic Co-operation and Development (OECD), is a significant global economic burden. A 2020 OECD report revealed that countries spend an average of 1.5% of their gross domestic product (GDP) on long-term care services such as medical, nursing, personal, and assistance care. Scandinavian countries and the Netherlands were in the highest ranges at around 3.5% of GDP, while other high-income countries, such as France, Switzerland, the United Kingdom, and Germany, spent around 2% to 2.5%. In areas with younger populations, such as Latin America and Southeastern Europe, unpaid caregivers often provide care to their aging family members.

The US is dealing with the dual-sided problem of staffing shortages as the cost of care for home-based expenses for the elderly grows. In fact, the annual medical cost of home health aides grew 12.5% in 2021 to $61,776, as 80% of adults over 50 choose to remain in their homes as long as they can. China is facing a future where, in just 25 years, a full third of their population will fall into the retiree category, which will significantly impact their GDP.

The power of digital transformation

In Japan — a country famous for topping lists of the world’s oldest populations — researchers have used simulations to demonstrate that reducing the number of people dependent on long-term care and providing community-based services can help healthcare systems manage costs more effectively.

Japanese researchers are also investing in the potential of healthcare innovation through digital transformation to extend life, improve quality of life, and reduce economic burden.

The Tsukuba Wellness Research initiative is exploring the concept of a Smart Wellness City, which uses digital technology to support patients by monitoring data like steps taken, blood pressure, and fat ratios. Initial results suggest that the benefits of their efforts could reduce average expenses by $500 per person annually and by as much as $2,000 for people in their 70s.

The role of healthcare leaders in reducing costs for aging populations

The World Economic Forum’s Global Future Council on Healthy Ageing and Longevity stresses the importance of bridging the gap for the elderly who might be left behind as services become increasingly digital. Their recommended steps include:

  • Designing inclusive technology that reduces the barriers that older adults face when accessing knowledge, trust, installation, and design. Older consumers will need digital literacy programs that reflect relevant technology and information.
  • Ending agism, which is a significant barrier to digital inclusion, by changing the way we think about problems, the way older people learn, and the solutions we develop.
  • Ensuring health access to prevent and manage health conditions for improved population health results. Issues like joint diseases, vision impairment, and cognitive issues can be major barriers to the use and success of digital services and devices.

Fortunately, healthcare organizations have multiple areas in which they make progress on these efforts, even as solutions that balance financial sustainability and the needs of older populations evolve. Here are some steps healthcare leaders can take to tackle this challenge.

Address known clinical issues for aging populations

Artificial intelligence and advanced algorithm technologies have multiple applications in this space. Sepsis costs Medicare more than any other discharge, for example, but using monitoring tools enhanced with Natural Language Processing (NLP) to catch the condition early and with accuracy can reduce variation in sepsis care — improving patient outcomes, quality measures, and financial performance.

Take on administrative healthcare costs

Healthcare administrative costs are particularly high in the US, with the country spending around $1,055 per capita — the highest of 12 OECD countries. This is partly driven by outdated provider preferences and administrative billing complexity. Many organizations are using technologies such as natural language processing and automation to automate workflows and reduce clinician burden.

Get ahead of staffing shortages

Healthcare organizations are also using AI and predictive models to lessen staffing shortages, reduce workloads, and effectively schedule staff. Efficiency in these areas expands team capacity by taking the burden off nurse managers who can be in charge of anywhere from 80 and 120 direct reports. Organizations can achieve similar gains in reducing nurse and clinician burden by relying on evidence-based solutions, exploring new staffing models, and engaging patients to close gaps in their care journey.

Partner with patients

Patients can be the greatest allies in organizations’ efforts to reduce costs while improving outcomes. By supporting patients with personalized care plans, compassionate content, and individualized outreach and guidance, healthcare providers can enlist them as powerful and engaged partners in their health journeys.

Scaling this level of personalization requires leaders to expand their team’s capacity to reach broader populations by leveraging insights from data, recognizing the importance of social determinants of health, and translating results into actionable, evidence-based strategies.

Empowering health organizations with digital tools

As longer life spans and chronic disease in aging populations continue to drive up healthcare costs and strain an already challenged workforce, health organizations need to invest in solutions and processes that will encourage financial sustainability. Ultimately, digital transformation holds the potential to balance the care needs of elderly populations and optimize cost reduction.

Learn about Wolters Kluwer’s suite of solutions to support reduced operational budgets, optimize clinical workflows, and improve patient outcomes.

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