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The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada's most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.

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Innovations in Healthcare Should Focus More on Cost-Effectiveness

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The current methods of paying healthcare providers do not encourage systematic consideration of cost-effectiveness in the selection of treatment or new technologies.

May 23, 2017 – The current methods of paying healthcare providers do not encourage systematic consideration of cost-effectiveness in the selection of treatment or new technologies, finds a new report from the C.D. Howe Institute. In The Paradox of Productivity, Technology, and Innovation in Canadian Healthcare, authors Åke Blomqvist and Colin Busby analyze the role of healthcare technology and innovation as drivers of the nation’s productivity performance, and find that a more efficient healthcare sector could be an important source of productivity growth for Canada.

“With healthcare now accounting for well over a tenth of GDP, the efficiency with which healthcare resources are used has a significant impact on overall productivity, and issues relating to new technology and innovation in healthcare have been attracting increasing attention,” state the authors. “There is evidence to suggest that a substantial share of our healthcare resources are wasted, being used for tests and interventions of no or little value,” they add. If ways could be found to gradually reduce this waste, productivity growth in healthcare could be boosted substantially.

In looking at reasons why Canada has experienced slow productivity growth, Blomqvist and Busby acknowledge Canada’s relatively low spending on R&D, and that a case can be made for  government policies to increase it. However, the report is critical of focusing too much on R&D: “while new technology is critical, productivity growth can be based on technology developed anywhere in the world, so there is no reason to expect a close relationship between an individual country’s productivity performance and the resources it devotes to R&D.” What’s more important in Canada’s healthcare system, they add, is that providers and managers  have strong incentives to adopt cost-efficient technologies and to  minimize waste.

In concrete terms, the report offers the following recommendations:

  1. Provincial governments, with support from Ottawa, should experiment with new models of provider payment that strengthen their incentive to adopt cost-effective drugs, treatment methods, and diagnostic tests.
  2. Patients should be empowered with information – including access to their personal health records as well as health outcomes measures for services provided – to enable more informed choices. 
  3. Governments should also work on creating a system of Health Technology Assessment (HTA) that discourages new technology that is too costly, yet is nimble enough to not impede the adoption of efficient innovations.

“It will be incumbent on national and provincial health technology assessment bodies, in the context of a more rapid pace of technological growth, to find ways to become more nimble,” states the report.

Click here for the full report.

The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada's most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.

For more information contact: Åke Blomqvist, Adjunct Research Professor at Carleton University and Health Policy Scholar at the C.D. Howe Institute; or Colin Busby, Associate Director, Research, C.D. Howe Institute: 416-865-1904 or email: amcbrien@cdhowe.org

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