Kieger Healthcare Chart of the Month

Did you know that clinical care is estimated to affect only 20% of our health well-being?
Hi, I am Raphael Oesch from Kieger.

Many factors influence our health and well-being. There are parts that we cannot influence, such as our genetics. However, the factors we can influence fall into one of 4 categories and have different estimated effects on our length and quality of lives. It is a simplified view because in reality most of the factors are also interconnected.

~10% of our health is influenced by the physical environment. This includes air and water quality and Housing. ~30% is influenced by Health behaviours, like tobacco use, balanced diet and Exercise. ~40% are influenced by social and economic factors such as education, employment, family and social support. And only ~20% by clinical care, which includes access to care and quality of care, meaning how well receive treatment from the healthcare system.

There are increasingly initiatives outside the health system that promote health and health equity through policy and practices.

Within the health system, however, the focus is dominantly only on access and treatment, which accounts for an estimated 90% of US health spending.

And that is because of a misalignment of incentives in most healthcare systems. We still live predominantly in a so-called “fee-for-service” environment, where healthcare providers are compensated based on the services they provide. But, we are at the beginning of a major system shift toward value-based payment, where the health outcome is rewarded rather than the service that led to that outcome.

In its purest form, this is done through global capitation programs, where a provider takes full financial responsibility for a person’s health. Suddenly preventive activities, home visits, closing gaps of care, and addressing social determinants of health become important components of such programs.

These measures attempt to address the 80% of factors that traditionally are not considered with the aim to avoid expensive health care costs down the line.

For us as investors, the good news is that companies participating in such programs have not only proven to do the right thing from a health system and health policy perspective, but they have also showed that it make commercially sense to consider all factors affecting our health.